China's Syngas-to-MEG Production Continues to Grow

As syngas-to-MEG capacity continues to be released, production has gradually increased every year except for a brief decline in 2020 due to the COVID-19 pandemic. According to CCFGroup, in 2022, syngas-based production reached 4 million tons, up 65% from 2018. It is estimated that syngas-to-MEG production in 2023 will be around 5.55 million tons, with a growth rate of nearly 40%.

Monthly production data shows that the sharp fluctuations in coal prices in recent years have had a significant impact on syngas-based MEG production. In October 2021 and the second half of 2022, coal prices saw unreasonable increases, leading to lower monthly output of syngas-based MEG due to profitability concerns. However, coal prices have fallen back to their core level in the first half of 2022 and throughout 2023, leading to a significant increase in syngas-based production. Currently, coal prices are relatively stable under the regulation of multiple departments and measures, which also provides some guarantee for the steady development of coal chemical companies.

In recent years, new MEG capacity in China has been rapidly put into production, intensifying competition on the supply side. In the context of the localization process, combined with the impact of periodic COVID-19, coal prices, and other factors, some low-competitive capacity in China has been phased out. From the perspective of plant operating conditions, the operating conditions of nearly 7 million tons of plants this year have been relatively good. This is related to the decline in coal prices this year, as well as the decline in volatility of MEG and coal prices. Although the overall price of MEG on the domestic market fell year-on-year, the prices of raw materials and MEG are more stable. Production companies can more accurately lock in production costs and profits, and overall plant operations are also more stable.

In terms of new plants, 2.9 million tons of plants were put into production in 2022, while only 400kt/year of one set of syngas-based unit from Yuneng Chemical are expected to be included in the capacity system this year; the 600kt/year plant from Zhongkun recently completed the process and is expected to be included in the capacity in early next year. In general, new plants have certain advanced features in terms of equipment, with advantages such as lower raw material consumption per unit. Judging from the production and start-up situation of new plants in recent years, most plants can operate at a rate of over 70%. Some companies can run at full capacity or even slightly higher than 100%, while others may maintain a low rate or even shut down temporarily in the year after they are put into production due to considerations such as profitability. However, overall, the output increase of new plants is still significant. In 2021 and 2022, the output of new plants that came into production in the previous year accounted for about 30% of the total coal-based production that year. It is estimated that this proportion will exceed 40% in 2023 under the stable operation of SHCCIG Yulin Chemical.

Although the commissioning of new plants will be temporarily slowed down in 2023-2024, a total of 1 million mt/year of plants from Yuneng and Zhongkun will be put into production in succession from the end of this year to early next year. In 2024, their output can be fully boosted. It is estimated that the monthly syngas-based production will not change much in the near future due to the production loss of Yulin Chemical in December 2023. After its maintenance is completed, the monthly syngas-based production may rise in 2024.