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Coal And Natural Gas Prices Rise In Methanol Collective Solid Foundation
Dec 05, 2017

As coal and natural gas prices rise collectively, methanol production costs increase. In addition, the arrival of haze in the north, environmental monitoring efforts to upgrade, the industry operating rate is bound to be compressed, tight supply side. At the same time, the downstream industry is still good profits, procurement of raw materials unabated. Methanol fundamentals improved in the context of the recent methanol prices to get rid of the adjustment trend, the main contract 1801 rose sharply Monday is strongly sealed in the daily limit, hit a new high of nearly 3087 yuan / ton. In view of a solid foundation, the price will be further higher in the future.


Raw material prices


China's methanol production mainly to coal, natural gas, coke oven gas as raw material, which in turn led by coal, followed by natural gas. Methanol production figures for 2016 show a 65% methanol-to-methanol ratio, a 19% methanol-to-natural gas ratio and a 16% methanol-to-coke ratio. Since coal and natural gas are the main raw materials for the production of methanol in China, we should pay close attention to the price trend of coal and natural gas when analyzing the price trend of methanol to find out the changes in the cost of methanol production.


Currently, it has entered the winter heating season. In order to strengthen the control of air pollution, many provinces have implemented measures to cut down production in the coal industry. It is understood that, in addition to Beijing, Tianjin and Hebei and its surrounding areas of 6 provinces (municipalities), Jilin, Sichuan, Henan and other places also joined the fall and winter air pollution control tough battle.


The tightening of environmental protection policies, the suspension of production and upgrading of coal enterprises, the civilian heating of coal in the first place, and the restriction of industrial coal will not only stimulate the high coal prices, but will also force the coal-based methanol output to drop significantly.


In addition, the end of November, several major LNG manufacturers in North China will be ex-factory price hike 1100-1500 yuan / ton, one day rose 21% -27%, East China and Central China also showed similar gains.


Industry capacity is limited


Affected by the escalating environmental monitoring efforts, the operating rate of methanol enterprises in North China has dropped from 54% in October to 40% at the end of November. Before that, the operating rate of methanol enterprises in North China was as high as 60% at one time.


In addition to North China, the methanol output in the northwest region is also at the forefront. However, since the northwestern region is not within the key environmental protection control areas and natural gas resources are available in the northwest, the methanol output in the region is not limited. However, it is noteworthy that the increasing rainy and snowy weather in the north and the slippery roads are not conducive to the transport of high-dangerous goods. Most of the methanol in the northwest region needs to be digested by outward transportation and is mainly transported to other areas mainly by road tankers. The bad weather Conditions will inevitably limit the capacity of methanol in the northwest region, leading to the emergence of a short "hungry thirst" scene in the eastern consumer regions.


Low stock in the port


Driven by the improvement of downstream profits, the production of olefins increased, and its consumption of imported methanol continued to increase. From January to October, the imported methanol consumed by the olefin plant accounted for half of the total imports, compared with only 30-40% of the previous few years. China's methanol imports in 2017 were much lower than in previous years, so that most of the time, the methanol inventory in the port was at a relatively low level. According to Golden Link, it is estimated that by 2017, China's methanol import volume will be 8.2 million tons, down by 0.6 million tons from 2016, a decrease of 6.81%.


Overall, the heating season is over, coal production is limited, but demand for natural gas increases, both together to raise the cost of methanol production. In addition, the escalating environmental supervision led to the methanol industry operating rate continued to fall, the market supply tightened, while the downstream olefin consumption capacity increased, imports of methanol stocks fell. Fundamentals of improvement, the future methanol prices still have sufficient upward momentum.