Gas restrictions lead to methanol supply reduction in China

As of Nov 2021, China methanol capacity has reached 97.375 million mt/yr. Capacity based on natural gas amounts to 12.09 million mt/yr, accounting for 12% of total. Coal remains the mainstream feedstock for methanol in China, with capacity based on coal takes up 76% of total methanol capacity.

Natural gas is typically restricted in chemical sector from Nov as more supplies should be allocated to heating in winter. As a result, some China domestic methanol plants fed by natural gas have to shut for maintenance during the restrictions. As of the time of this writing, Qinghai Zhonghao has shut its methanol plant in early Nov, and Berun Group has reduced operating rate and then shut its units based on natural gas in Inner Mongolia on Nov 19. In addition, some plants in Sichuan and Chongqing have cut operating rates since H1 Nov and are poised to shut down.

Maintenance schedules of methanol plants based on natural gas in China

About 4.92 million mt/yr methanol capacity fed by natural gas in China could be affected by gas restrictions in this year’s winter. The amount of capacity that would be impacted are little changed from a year earlier. The average operating rate of methanol plants based on natural gas is expected to further drop to 35%-36%.

In a conclusion, though the gas restrictions would be carried out as the participants expect, the contraction in domestic methanol production would support China methanol market. Meanwhile, as coal price is high this year, production rise from plants based on coal would be limited. Tight methanol supply in inland China could continue till the end of 2021 or the beginning of 2022.