the changing in china methanol market · spread（cfr se asia ‐cfr china） spread（fob usg...

Ken Yin – ICIS China16th IMPCA 2013 Asian Methanol Conference

The Changing in China Methanol Market

Ken YinMethanol & Derivatives, ICIS China

16th IMPCA 2013 Asian Methanol Conference 2013

2013. 10. 31. Singapore

I. A Perspective on Chinese Market Changing 2013

Content

II. Current State & Development of the Industry

1. Supply2. Demand3. Logistics4. Price5 Cost5. Cost6. Profit


A Perspective on Chinese Market Changing 2013

1. Wider import price gap, deal done at two ends

2 Wider gap between coastal ex tank and domestic delivery 2. Wider gap between coastal ex-tank and domestic delivery price

3. Export arbitrage window opens

4. Pulsing market prices

5 Higher ratio on foreign suppliers’ selling contracts and 5. Higher ratio on foreign suppliers selling contracts and impoters’ spot deals


Wider import price gap, deal done at two ends

ICIS CFR CMP high end VS low end , 2012.1-2013.9

5

10

15

20

25

30

320340360380400420440460

USD/T USD/TPrice gap< USD10/tonne Price gap at USD10-25/tonne

0300

Spread MinPrice MaxPrice Change EXT jiangsu into dollars


Wider gap between coastal ex-tank and domestic delivery price

CNY/TON CNY/TON


ICIS east-China port ex-tank VS Domestic DEL, 2012.1-2013.9

‐50

0

50

100

150

200

2,500

3,000

3,500 Price gap (-50~50) CNY /tonne Price gap (-50~150) CNY / tonne

‐1002,000

Spread(Extank‐Del) EXT Jiangsu DEL Jiangsu

Domestic cargoes flow into Jiangsu, Zhejiang and Shanghai increased


Methanol supply structure in Jiangsu, Zhejiang and Shanghai

45%

24%

2012688（10kt）

Import

Inland Domestic Out put

2013870（10kt）

45%

20%

31% Coastal Domestic Output35%


3,400

Import price inversion disappeared？


Group1 VS Group2 VS Ex-tank VS Domestic DEL, 2013.1-2013.9CNY/TON

2,600

2,800

3,000

3,200

,

2013 Q1-Q3 import showed inversion

2,4002013/1/4 2013/2/4 2013/3/4 2013/4/4 2013/5/4 2013/6/4 2013/7/4 2013/8/4 2013/9/4

EXT Jiangsu DEL Jiangsu CFR Low End CFR High End

Note: CFR Low End 和 CFR High End converted to RMB（RMB=CFR*1.17*1.055*Rate+ Storage fee）

150 USD/TON


Export arbitrage window opens

Methanol export arbitrage window 2006-2013

‐50

0

50

100

2006年 2007年 2008年 2009年 2010年 2011年 2012年 2013年

Spread（CFR SE Asia ‐ CFR China） Spread（FOB USG ‐ CFR China）

10KT

0

20

40

60

2006年 2007年 2008年 2009年 2010年 2011年 2012年 2013年Export Volume


Stable on foreign suppliers’distribution channel , volume soften Chinese producers’scale increased；more integration on scale projectKey downstream users located in Zhangjiagang, Nanjing, Ningbo；Ratio on scaled users of downstream increased


Supplier distribution VS Downstream purchasing 2013E

Key downstream usersDomestic supplierForeign supplier

<200 kt/yr 33%

>600 kt/yr 14%

>30kt/month

35%

<10kt/month

22%

Supplier distribution VS Downstream purchasing，2013E

Methanex0%

FPC/KPC/ZQAFAC

OTI8%

Salalah9%

BMC1%

Others1%

200 kt≤

~≤600 kt/yr 53%

10kt≤‐≤30kt/mont

h43%

Data source: ICIS

/ /PC49%

Sabic13%

IMC4%

Petronas6%

Kaltim/Medco4%

QAFAC5%

Higher ratio on foreign suppliers’ selling contracts and impoters’ spot dealsLarger demand for domestic cargoes from coastal regions


Supplier selling and downstream purchasing Contract VS Spot ratio，2013E

Key downstream usersDomestic suppliersForeign suppliers

Spot10%

Contract50%

Spot50%

Contract52%

Spot48%

Contract90%

52%

Data source: ICIS


I. A Perspective on Chinese Market Changing 2013


Content


1. Supply2. Demand3. Logistics4. Price5. Cost6. Profit

各地甲醇有效产能及2013‐2016新增柱图

Production increase in North America; Uncertainty of plans of the Middle East;Increase of China’s capacity leads the world; —— Does supply in China experience excess capacity or a shortage of capacity?

Supply

4,000

6,000

万吨 Bar graph of effective capacity in all regions & 2013-2016 increased capacityMillion tons

2012 2013-2016

国家公司/地点产能 (投产时间)

单位: 10kt

RussiaZAO Ural Methanol Group60 (2016)

AzerbaijanAzmeco

IranKharg 2

SwedenVarmlandsMethanol10 (2014)

Russia JSC Ammoniy23 (2016)

IranMarjan

U.S,Lake Charles

CountryCompany/LocaitonCapacity (production time)

Unit:10kt

0

2,000

南北美中国中东欧洲俄罗斯东南亚西亚

2012有效产能 2013-2016有效产能增量

South &NorthAmerica

China Middle East Europe West AsiaRussia Southeast Asia

2012 effective capacity

2013-2016effective capacity

increment

New ZealandMethanex85 (2013)Restart

AlgeriaAlmet

100 (2015)

EgyptMethanex126 (2011)

Azmeco56 (2013) 140 (Uncertain)

U.S.Pandora Methanol85 (2012)Restart

U.S.Celanese130(2015)India

GSFC17 (2013)

China2000(2012-2015)

NigeriaViva

35(2012)

Marjan165 (2014)

U.S.Lyondell 78(2013)Restart

U.S.Methanex100(2014)Chile device migration

U.S.OCI85(2012)Restart

Lake Charles130（2016）

IndiaAam PC 17ss (2016)

Source: ICIS China


Global Methanol Capacity Addition & Deletion Chart 2000 2015

The shift of production center: EU/US – Middle East/China – North America recover2000-2015 CAGR of ROW effective capacity is 3.2%2000-2015 CAGR of China effective capacity is 21.3%—— Will China capacity growth continue 2015-2020?

Supply

40%

50%

60%

70%

80%

90%

100%

6,000

11,000

16,000

Unit: Kt

Global Methanol Capacity Addition & Deletion Chart, 2000-2015

0%

10%

20%

30%

-4,000

1,000

2000 2002 2004 2006 2008 2010 2012 2014 2016

Capacity Additions Capacity Deletions O/R of ROW O/R of China effective capacity

Both absolute value and growth rate of supply and demand in China lead the world. What changes in growth rate will happen after 2015?

China effective capacityCAGR

2000-2010 28%

The rest of the world capacity effectively

CAGR3.3%

China demandCAGR

2000-2010 19.6%

The rest of the world demandCAGR1.1%

2010-2015 11.7% 2.9% 2010-2015 22.2% 2.7%

Demand

2000 /2010 /2015 Capacity ChangesWorld VS China

10%中国Chi

China11%38%

2000

2010

2015

2010 2015 11.7% 2.9%

2015

2010

2015-2020 ？？2015-2020 ？？

2000 /2010 /2015 Consumption ChangesWorld VS China

90%

China46%Except

China54% 56%

44%中国

中国以外

China

Except China Except

China89%

40%

60%62%

20002000

Source: ICIS China


MTO/P becomes the biggest factor of uncertainty of demand for methanol. Will consumption growth really develop towardsthe optimistic direction as scheduled?

2012-2015

CAGR conservativeMTO/P 52.66%

2012-2015

CAGR optimistic80.16%

Other downstream 17.11% 17.11%

Demand

17%

9%

14%

14%

7%

4%

30%17%

9%21%

14%

11%

6%

4%42%

2012 /2015 Methanol consumption structure in China （optimistic）

2012 /2015 Methanol consumption structure in China （ conservative ）

2012

20152015

2012

Consumption >50Mil

17.97%

>60 Mil

25.17%

9%

6%

18%15%

21%4%

17%

12%

16%

Formaldehyde AAMTBE Other traditional downstreamDME Methanol gasolineMTO/MTP

6%

18%15%

21%

14%

10%

13%

Formaldehyde AAMTBE Other traditional downstreamDME Methanol gasolineMTO/MTP

Source: ICIS China

Drivers and Trend

Question：

Is MTO/P project delayed, shelved or transferred? That is, what

percentage of demands of MTO/P for methanol will be

achieved?


Question 1: That is, what percentage of demands for methanol will be achieved?

Unit：10Kt4402012

>1500 or 2500 ？2015

Methanol consumption equivalent

Inner Mongolia

Inner MongoliaSinkiang

Heilongjiang

Demand

2012 2015

Constructed projects

Approved & Pending projects

Inner Mongolia

NingxiaNingxia Hebei

Shaanxi

AnhuiZhejiang

JiangsuHenan

Shanxi

Guizhou

2014-2015 MTO/P Project Classification Statistic (Unit 10Kt)

Project classification2014 Olefin cumulative

capacity/ Number of projects

2015 Olefin cumulative capacity

/ Number of projects2014 Methanol demand 2015 Methanol demand

High certaintyProject 565.50 /11 785.50 / 13 767.50 1563.50

Low certaintyProject 333.00 / 7 524.00 / 11 165.00 1004.30

All Project 898.50 1309.50 932.50 2567.80

Source: ICIS China

Ethylene Cap 2012: 17Mil; Additional expansion 11Mil in 2013-2015.Propylene Cap 2012: 16Mil; Additional expansion 17Mil in 2013-2015.MTO accounts for 44.65% of extended ethylene production capacity MTO/P and PDH account for 34.21% and 40.71% of extended propylene production capacity, respectively. How the economy of these projects are?

Demand

42%47%

24%21% 2%4%

1%

20%

2012 /2015 China's ethylene

capacity structure2012 /2015 China propylene

Capacity structure

y p j

2000

2015 2015

2000

11%23%

32%

catalytic cracking MTO/P ethylene cracking PDH

94%79%

Catalytic cracking MTO/P Ethylene cracking

2000

Source: ICIS China


Demand

2007-2015 China PP/PE Capacity, Import, Output and O/R

2007-2012 PP/PE Consumption CAGR 9% ； 2013-2016 estimate at 5~7%Import 13Mil in 2012, accounting by 36%, and estimate drop to 25% 2016PP/PE Cap 26 Mil 2012, and estimate increase to 46Mil 2016 with the CAGR 15%O/R of PP/PE at 87% in 2012 and estimate drop to 62~75% in 2016.

Unit: KtO/R (%)

100%50 000

30%

40%

50%

60%

70%

80%

90%

100%

10,000

20,000

30,000

40,000

50,000

Source: ICIS China

0%

10%

20%

30%

-10,000

0

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Capacity Production Imports Exports Operating rates Capacity growth rate

China methanol expansion capacity is 20 million tons in 2013-2015, 65% of which has downstream projects China CTO/MTO expansion capacity is 11 million tons in 2013-2015, 48% of which has locked its feedstock.If all planned projects go into operation as scheduled, will it realistic that the effective operating rate of methanol equipment can exceed 90%?

S&D Balance

2000-2015 China’s methanol capacity growth vs. average operating rate change

20%

40%

60%

80%

100%

120%

2,000

3,000

4,000

5,000

6,000

7,000

10Kt tons /yearsCNY/Tons O/R (%)

-40%

-20%

0%

20%

-2,000

-1,000

0

1,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013E 2014E 2015E 2016EEffective capacity

closed-down capacity

Effective capacity growth

China's effective device utilization(Conservative demand estimates）

China's effective device utilization(Optimistic demand estimates ）

Source: ICIS China


2012 International Supply and Demand (Unit: 1,000 tons)

The Middle East, South America and China dominate international methanol supply. Methanol demand in Asia is driven by China. Methanol in the Middle East is dominant in Asian import volume.

Logistics

Effective capacity Output Import volume Demand Export volume

Global 88,300 62,800 25,100 63,000 24,900

Africa 3,000 2,200 0 200 2,000

Europe 7,600 6,000 5,700 10,000 1,700

America 13,000 9,500 6,500 8,500 7,500

Middle East 16,000 13,000 600 3,000 10,600

Asia 48,700 32,100 12,300 41,300 3,100

India 500 300 1,100 1,300 100

Northeast Asia 43,000 28,000 9,500 37,500 0

Southeast Asia 5,200 3,800 1,700 2,500 3,000

我们的项目能力和经验

Northeast Asia

N th A i

Europe

In the future, international trades will continue to increase. Potential increase in China by international suppliers?

Logistics

1,300 2,000

Southeast Asia

6,400 7,500

-9,500

-16,000

-5,400-3,500

North America

-4,000 -4,100

12,00014,800

Africa/Middle East

South America-1,000 -1,100

Indian Subcontinent

2012

2015

Net export =Export-Import (Unit: 1,000 tons)


45%

50%

6,000

7,000 2001-2015 supply structure of methanol and its price change trend in China

Unit: 10kt

Counter balance between downward pressure on price of methanol from raw materials and support to price of methanol due to short supply.Trend of price changes in China before and after 2015?

Price

10%

15%

20%

25%

30%

35%

40%

1,000

2,000

3,000

4,000

5,000

China's import dependency

East China annual average price

0%

5%

10%

1,000

0

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012E 2013E 2014E 2015E 2016EChina'output(CBI） China's import China'export

East China annual average price China's import dependency

Source: ICIS China

Shale gas development will extend the low-side cost curve When will China’s shale gas development benefit methanol industry?

Coastal China CIF curve of global methanol

Cost

500

USD/ton

200

300

400

200520102015

千吨/年

Unit（Kt）

0

100

0 10000 20000 30000 40000 50000 60000 70000 80000 90000

2015


2009-2013 curve of changes in methanol and major downstream profits

Profit of methanol gradually turned losses into gains since the second half of 2010. Conventional downstream profit is small and even continues to undergo loss. Impact of profit polarization of the upstream and the downstream on price trend of methanol?

Profit

g j pUSD/tons

-20.0%

0.0%

20.0%

40.0%

60.0%

80.0%

Source: ICIS China

-60.0%

-40.0%

Formaldehyde margins AA margins DME margins

M15 margins Meoh Margins CTO margins

Supply

ConditionDo newly-constructed and expanded projects with high cost of operation withdraw?

InfluenceRegional supply is out of balance and international trade volume tends to increase.

Methanol Industry: Critical and Trend

DemandEconomic performance of application of alternative energy. Does the government have great faith?

Potential of MTO/P achieving the production objectives as scheduled? Degree of matching between olefin extension and downstream consumption growth?

Relational degree of price and raw material? The downstream differentiates

Impact of raw materials on product price and impact of cost factor on downstream consumption growth

Price

Profit

price affordability. Impact of futures on spot price

Upstream profit guarantee? Downstream profit varies and regional profit is at international low.

Perspective of globalization and integration of the upstream and the downstream, impact of profit orientation on investment decision, and changes in future supply and global trades


1. In the next 3 to 5 years, capacity expansion of internationalmethanol unit and low-cost production expansion in the MiddleEast will enter into gap year. Global production expansion and

Conclusion

g p y p pconsumption growth focus on China.

2. In ethane and ethylene derivatives (polyethylene, glycol, PVC, etc.)trading market, North American becomes a bigger player and itsexports will sharply increase after 2015. However, as olefincapacity expansion projects with different technologies in Chinaare numerous, there is a doubt whether MTO project plans underth t l i ill b hi d l dthe current planning will be achieved as planned.

3. Cost advantages of natural gas, oil and coal for petrochemicalmanufacturing vary based on resource endowment. Coal will beused to compensate oil consumption growth in an area where is

Conclusion

p p glack of oil and natural gas.

4. Counter balance between downward pressure on price of methanolfrom raw materials and support to price of methanol due to shortsupply will be the most important focus of long-term price trend.


殷晨洁 Ken Yin信息经信息经理 Information Manager电话(Tel): +86 (0)21 5155 0200传真(Fax): +86 (0)21 5155 0190邮箱(E-mail)：[email protected]

the changing in china methanol market · spread（cfr se asia ‐cfr china） spread（fob usg...

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