Coal-to-MEG Industry Expects Breakthrough

By Wang Hongzhen

Coal-based MEG’s market share increases steadily

The annual growth of China’s MEG capacity has fluctuated greatly in recent years. The capacity was 2.24 million t/a in 2009 and then rose by 60.71% in 2010 due to the launching of a 650 kt/a plant. In 2016, Yangquan Coal Shenzhou, Yangquan Coal Shouyang, Xinjiang Tianye, Yongcheng Yongjin all started their new coal-to-MEG plants, expanding the national capacity to 8.343 million t/a, with a growth of 2.46%. Capacity growth slowed in 2016, while in 2017, the market saw only Maoming PC expand its capacity – by 100 kt/a – bringing the total capacity to 8.443 million t/a. The capacity expansion trend shows that the proportion of coal-to-MEG is steadily increasing. Please refer to Chart 1, China’s coal-to-MEG capacity expansion, 2009-2017.
China is comparatively short of oil and gas. As most large-scale MEG plants at home and abroad use ethylene as feedstock, the cost of China’s plants is high, and China’s polyester and textile industries’ competitiveness is also greatly influenced by price fluctuations in the crude oil market. Hence, coal-to-MEG is very important to China. Meanwhile, the investment in a new coal-to-MEG plant is usually in the range of RMB2-5 billion, much lower than coal-to-gas and coal-to-olefin plants, which need over RMB10 billion. The construction period of coal-to-MEG plants is about one or two years, also shorter than coal-to-olefin plants’ three years. All these factors drive the construction enthusiasm.

Launching speed slows down

The frequency of launching new coal-to-MEG plants is slowing down due to technology issues, environmental protection and profitability. As China’s overall economic growth slackens, the coal-based industry faces many problems; at the same time, low oil prices and issues in funding have both impacted the growth of the coal-to-MEG industry. By November 2017, 1.06 million t/a of capacity planned for launch in 2017 is behind schedule. Please refer to Table 1 for details.
Chart 2 tells us that China’s MEG production in 2017 is higher than in 2016, even though some new capacity is delayed in coming on stream. The growing profits on the back of recovering MEG prices have promoted production, which is more evident for coal-to-MEG plants. For instance, the plant of Shanxi Shouyang and the one of Henan Yongcheng, both launched at the end of 2016, are running at higher utilization in 2017. By September 2017, domestic MEG operating rates averaged 72.32%, 11.26% higher than the same period of 2016; and output has reached 4.4973 million tons, 18% higher than the same period of 2016. MEG production in 2017 is forecasted to exceed 6 million tons.
Capacity growth differs from production growth because most capacity expansion is in coal-to-MEG plants, which have not been fully recognized by downstream polyester factories due to the quality gap between coal based products and oil based products. For large-scale polyester factories, coal-to-MEG usually supplies 10-20% of the MEG feedstock, and very few chemical fiber factories only purchase coal-to-MEG as raw materials. This situation might change after the coal-to-MEG operating rate increase of 2017.

Table 1   China’s newly built coal-to-MEG in 2017

Company    Capacity (kt/a)    Launch time
Hebei Xinji Chemical    60    Trial run in late July 2017
Inner Mongolia Tongliao Jinmei    100    Q3
Shanxi Yangquan Coal Pingding    200    Q3
CNSG Anhui Hong Sifang    300    November
Henan Energy and Chemical (Luoyang)    200    November
Shandong Lihuayi    200    October


Import substitution opportunity is big

China’s dependence on imported MEG is still very high. The apparent consumption and import volume in 2015 were respectively 12.752 million tons and 8.772 million tons, so import dependence was 68.6%. The opportunity to displace imports is large.
The import volume in 2016 decreased by 13.7% YoY to 7.5728 million tons, and the import dependence declined to 60%, which was largely due to a burst of maintenance on plants overseas. The monthly import amount in 2017 is again higher than that of 2016.  Most foreign plants were shut down for maintenance in Q1 2017, when the import prices increased due to short supply. After a new plant in India started production, the import volume of Q4 2017 is expected to rise.

Product quality needs to be improved

Because of impurities in coal-based MEG, it is mainly used in low-end products such as antifreeze and liquid-borne agents, and its consumption in making PFY, which consumes 90% of MEG, is restricted. Therefore, the operating rate of coal-to-MEG producers has remained low. Product quality has become a major obstacle in the development of coal-to-MEG.
The coal-to-MEG production process in China is mature, and the decisive factor is the performance of the catalyst, which determines the production yield as well as operational stability. So, the development of catalysts should be the focus of coal-to-MEG manufacturers in the near future.
The coal-to-MEG demonstration projects that have been put into operation are running smoothly, and some of them are operating stably at high utilization. From 2017 to 2018, China will see another 2.98 million t/a of coal-to-MEG capacity, accounting for 64% of all new MEG capacity. With the progress of technology, impurities in coal-based MEG will be gradually reduced, and coal-to-MEG will have a broader room for development.