Methanol Market Services Asia, Xiaoshu Wang

Global Methanol Outlook
Prepared for
Asian Nitrogen + Syngas 2016

November 21 – 23, 2016
Jakarta, Indonesia
By:
Wang Xiaoshu
Analyst
Methanol Market Services Asia Pte. Ltd.

Manhattan House
151 Chin Swee Road, Level 9-07
Singapore 169876
Phone: +65 6465 2720
E-mail: services@methanolmsa.com
MMSA – Global Insight, Asian Perspective™
• 13th Year of Operation, based in Singapore

– Employee owned, Independent
– Dedicated Consultants with over 51 years of Methanol
industry experience: Singapore, Shanghai, Frankfurt, Seattle
• Multi-Client Services
– Methanol & Derivative Analysis
• Methanol, Formaldehyde, Acetic Acid, MTBE, MMA, Energy Use in
global detail
– Methanol Notes™
• Topics of relevance in brief, weekly
– MMSA Weekly Methanol Analysis
• Global market analysis and price assessment every Friday Singapore
time
– China Monthly Methanol Analysis (CMMA)
• Project Services
– Market and Technical Due Diligence Support
– Bankable Project Assessments, Valuation
• IMPCA Asian Conference – Singapore Nov 1-3, 2016
• Methanol Policy and Technology Commercial Congress – Frankfurt Nov
29 – Dec 1, 2016
Global Methanol Outlook – November 2016 © MMSA Pte Ltd. All Rights Reserved.
Major Points
• Supply and Demand Overview 2011 – 2021E

– Methanol downstream comprised of “two faces”
• Traditional derivative demand remains steady, mirroring GDP “plus” growth rates
• Methanol to Olefins (MTO) is the main driver of methanol demand growth
– Regional supply and demand balance
• China balances slowly improving with demand growth outpacing supply growth
• US, Atlantic Basin balances upended by new US Gulf Coast Supply
– Intercontinental trade flow shifts anticipated
• “Methanol Bridge” that connects East and West has opened for alternative option,
but availability depends on arbitrage opportunity
• Expect further trade from Middle East/Africa to Asia as Atlantic Basin remains
majority
• Influence from Upstream and Downstream
– Supply cost and derivatives affordability sets boundaries to prices
– MTO competitiveness serves as a function of naphtha, propylene values
– Prices are connected globally
• As refined product values return to steady state, MTO affordability will recover,
supporting methanol market prices long term
With formaldehyde still dominant, new applications
leading global methanol demand growth, tremendously
Methanol Demand By Derivative - World

Others
140,000
Methanol-to-Olefins
Fuel Cells
120,000
DME
Biodiesel
100,000
Gasoline Blending &
Combustion
Methyl Chloride
80,000 (Chloromethane)
Methylamines
60,000 Methanethiol (Methyl

Mercaptan)
Dimethyl terephthalate
(DMT)
40,000 Methyl Methacrylate
Methyl tert-Butyl Ether

(MTBE)
20,000 Acetic Acid
Formaldehyde
0
2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E
Methanol demand growth boosted by new,
emerging derivatives
• Traditional Derivatives
– Main use: formaldehyde, acetic acid, MTBE, DME
– Slow and steady increase throughout the period, generally follow
macroeconomic growth
• Lack of incentives to boost demand growth
– Still growing at multiples of GDP
• New Applications
– Main use: gasoline blending, MTO
– Emerged in the 2000s, rapid expansion from 2011
– Dominate methanol demand growth in forecast years
• The strongest growth in methanol demand will come from
the Methanol-to-Olefins (MTO) application, driven by a
number of commercial projects now underway.
• In forecast years, MTO will gradually replace traditional
derivatives as the leading source of methanol demand.
China remains the main driver of methanol
demand growth
Demand for Methanol
2011 - 2021E
100,000
90,000
80,000
70,000
60,000
-000- tonnes
50,000
40,000
30,000
20,000
10,000
0
2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E
Asia North America South America Europe Rest of World China
Supply growth: slows in Asia (China),
accelerates in the US
Supply Capacity for Methanol by Region
2011- 2021E
100,000
90,000
80,000
70,000
60,000
-000- tonnes
50,000
40,000
30,000
20,000
10,000
-
2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E
Asia North America South America Europe Rest of World Middle East
Capacity growth is led by China and North America,
while new merchant capacity lies in the latter mostly
Growth in Methanol Capacities by Region, 2016E - 2021E
(-000- metric tons)
25,000
20,000
15,000
10,000
5,000
0
China Asia ex North South Europe Russia Middle East Africa Total
China America America
-5,000
Global methanol demand to catch up eventually with supply
growth, leading to higher operating rates, margins
Methanol Supply and Demand - World
160,000
4Q2016 Update 100%
Forecast
140,000 95%
120,000 90%
100,000 85%
Thousand Tonnes
80,000 80%
60,000 75%
40,000 70%
20,000 65%
- 60%
2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E
Total Demand Production

Production Capacity (Actual) Production Capacity (Adjusted)
Op Rates (Based on Adj Capacity - Right Axis)
New merchant projects in US allows North America supply to
be self-sufficient, with demand growing slowly
Methanol Supply and Demand - North America

12,000 12,000
10,000 10,000
8,000 8,000
Thousand Tonnes
6,000 6,000
4,000 4,000
2,000 2,000
0 0
2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E
-2,000 -2,000
Total Demand Production Production Capacity Net Trade

European demand remains dependent on imports; no new
capacity anticipated, imports from Russia down, from US up
Methanol Supply and Demand - Europe

10,000 10,000
9,000 9,000
8,000 8,000
7,000 7,000
6,000 6,000
Thousand Tonnes
5,000 5,000
4,000 4,000
3,000 3,000
2,000 2,000
1,000 1,000
0 0
2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Majority of capacity addition in China is integrated
projects, increasing imports are necessary
Methanol Supply and Demand - Asia

100,000 100,000
90,000 90,000
80,000 80,000
70,000 70,000
60,000 60,000
Thousand Tonnes
50,000 50,000
40,000 40,000
30,000 30,000
20,000 20,000
10,000 10,000
0 0
2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E
Southeast Asia, India providing substantial methanol
demand growth, little growth in supply to 2020
• Demand growth driven by investment in traditional

derivative production, improved biodiesel production in
Malaysia and Indonesia
• Methanol projects in Indonesia, Papua New Guinea,
Australia, Vietnam, India all exist in “drawing stages,” yet
not yet at deployment stage – likely middle of next
decade
• Region will remain net importer of methanol molecules
• Fragmented, smaller markets will require higher shipping,
logistics costs
– Middle East molecules have most efficient access from outside to these
markets
Stable with potential capacity growth, Middle East
continues to be export-oriented; Iran a “wild-card”
Methanol Supply and Demand - Middle East
25,000 25,000
20,000 20,000
15,000 15,000
10,000 10,000
Thousand Tonnes
5,000 5,000
0 0
2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E
-5,000 -5,000
-10,000 -10,000
-15,000 -15,000

Gap between supply and demand growth leads
to dynamic change in global trade patterns
• Little merchant capacity addition in China is expected in the

forecast.
– China policy for new coal chemical project approval is tightening
– To meet fast-growing demand, increasing import will be anticipated
• Asia (ex China) will supply the large conventional methanol
demand in the coming years
• Increasing US supply will result in shifts of American trade
flow, aiming at markets with rising demand
– More cargos flew into Asia when arbitrage window was open
– Competitiveness versus other supply source will vary by project
– Risk of natural gas price volatility should not be ignored
2013, 2014, 2015 Methanol Trade Flow
(Bubble Size Proportional to Capacity to Produce Methanol)
1,636, 1,522,
Russia
1,234
Canada Europe
567, 1,710, 770, 914, 1,340
231, 173, 201 2,024
To 185, 173,Middle 331, 193, 71
283, 292, 276 154 East
Northeast
Asia United 730, 665, 529
Libya China
States 789, 567,
0, 0, 259 4,711, 4,111, 75
Egypt 1,600, 1,840, 2,055 1,067, 1,014,
1,059
2,926
Southeast
Trinidad 1,330, 1,047, 1,098
Asia
& Equatorial
Venezuela Guinea 7,047, 5,948, 6,956 992, 1,816,
1,786
New
Zealand
Taken from MMSA Methanol and Derivatives Analysis (MDA)
* Americas Supply * Persian Gulf Supply * Other Supply
Methanol Pricing and Margin
• Prices Limited on high side by derivative affordability

– MTO now the “marginal buyer” of product
• Prices Limited on low side by marginal cost of supply
– Firmly located in China, based on coal feed
• Coal economics are less directly related to crude
• New supply and slowed China demand growth has caused
correction in methanol prices
• Methanol prices near term will remain in narrowed range between
cost to produce and affordability into MTO
• Longer term, pull from energy, MTO demand will keep supply tight
and support prices
• Prices are connected globally – optional molecules to remain
centered in Middle East until East-West “Methanol Bridge” is fully
functional
Coal prices in China is in rapid recovery pace,
opposite to crude price fall
Premium Coal vs. Crude Oil
(Monthly Prices to Nov'16)
160 80
Crude Oil, Brent, USD/bbl
140 Coal, Datong Premium Mix, FOB QHD Port

70
Crude Oil, Brent, USD/MMBtu

120 60
USD per ton or per bbl
Coal, Datong Premium Mix, FOB QHD Port,
USD per MMBtu

USD/MMBtu
100 50
Natural Gas, NYMEX-Henry Hub
80 40
60 30
40 20
20 10
0 0
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Oct-03
Oct-04
Oct-05
Oct-06
Oct-07
Oct-08
Oct-09
Oct-10
Oct-11
Oct-12
Oct-13
Oct-14
Oct-15
Oct-16
Apr-03
Apr-04
Apr-05
Apr-06
Apr-07
Apr-08
Apr-09
Apr-10
Apr-11
Apr-12
Apr-13
Apr-14
Apr-15
Apr-16
Jul-03
Jul-04
Jul-05
Jul-06
Jul-07
Jul-08
Jul-09
Jul-10
Jul-11
Jul-12
Jul-13
Jul-14
Jul-15
Jul-16
With coal prices being bullish, Chinese production
remains the highest cost
MeOH Delivered Cash Cost - Early October 2016
Coastal China Main Ports, 2016 Net Available Capacity*
$600
China Adjusted Import Prices

$500 (Sep'16, CFR plus duty, throughput)
China Adjusted Domestic Prices

$400 (Sep'16, Avg East/South China less VAT)
USD per metric ton
$300
$200
$100 2016E China Demand

(Oct'16 Update)
$0
0 10000 20000 30000 40000 50000 60000 70000 80000
Cumulative Available Capacity*, -000- metric tons
Methanol affordability for most applications “under
water,” ceiling compressing prices
Methanol Volume vs. Value - China

Late October'16
Taken from MMSA China Monthly Methanol Analysis (CMMA)
800 MTBE
Average Price for East China, Ex-Tank,
Average October'16; 1 USD = 6.73 CNY
700
Methanol "Affordability," USD/MT
Average Price for East China, Ex-Tank,

Average September'16; 1 USD = 6.67 CNY
600
500 MMA
Chloro-methane Gasoline
400 Blending
(equal energy)
300
AA DME
200 Olefins
Methylamines
100
Formaldehyde
0
0 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000 55000
-100
Cumulative Consumption of MeOH in China, 2016E (Oct '16 Update),
-000- tons, Select
With low crude, methanol becomes less competitive versus
naphtha based olefins
MeOH Pricing to MTO vs Market Price, CFR China Basis

1.2 metric tons Propylene / metric tons Ethylene
700
600
500
400
USD per metric ton
300
200
100
0
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Sep-00
Sep-01
Sep-02
Sep-03
Sep-04
Sep-05
Sep-06
Sep-07
Sep-08
Sep-09
Sep-10
Sep-11
Sep-12
Sep-13
Sep-14
Sep-15
Sep-16
May-00
May-02
May-03
May-05
May-06
May-08
May-09
May-11
May-12
May-14
May-15
May-01
May-04
May-07
May-10
May-13
May-16
-100
-200
Taken from MMSA China Monthly Methanol Analysis (CMMA)
-300
MeOH "Equivalence" MeOH Market MTO Affordability Less Market
…however MTO cash margins on ethylene
remain positive
Cash Margins on Ethylene, MTO vs Naphtha
Hypothetical Asia, 1.2 tonnes propylene/tonne ethylene
1400
1200
1000
800
USD per metric ton
600
400
200
0
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Sep-08
Sep-09
Sep-10
Sep-11
Sep-12
Sep-13
Sep-14
Sep-15
Sep-16
May-11
May-12
May-13
May-14
May-15
May-16
May-08
May-09
May-10
-200
-400 Taken from MMSA China Monthly Methanol Analysis (CMMA)
-600
Cash Margin - Ethylene NE Asia Spot Basis via Naphtha
Cash Margin - Ethylene NE Asia Spot Basis via MeOH
China MTO blossom –Upcoming MTO startup end
2016/early 2017 created increment demand, although
production economics remains challenged.
Methanol-To-Olefins (MTO) Projects
Integrated Projects:
Methanol Olefin
Company Location Start Up Operation Remarks
(mtpa) (mtpa)
Shenhua Group Baotou, Inner Mongolia 1.8 0.6 2010 Aug Running well
Shenhua Ningmei Ningxia 1.67 0.5 2011 Apr Restarted from outage 2016 May 13 - Jun 15
Datang International Duolun, Inner Mongolia 1.67 0.5 2011 Shut down for maintenance outage
Shaanxi Yanchang Zhongmei (Chinacoal) Yulin Nengyuan
Yulin (Jingbian), Shaanxi 1.8 0.6 2014 Jun Running to plan
(Energy)
Zhongmei Shaanxi Yulin Energy Chemical Co., Ltd Yulin, Shaanxi 1.8 0.6 2014 Jul Running to plan
Shenhua Ningmei Phase II Yinchuan, Ningxia 1.8 0.6 2014 Aug Running to plan
Ningxia Baofeng Energy Group Ningxia 1.8 0.6 2014 Oct Restarted from outage May 4 through 26 for maintenance outage, along with methanol
Shaanxi Pucheng Clean Energy Weinan, Shaanxi 1.8 0.67 end 2014 Running to plan
Mengda New Energy Inner Mongolia 1.8 0.6 2016 Apr Started up Apr 15 2016. Delayed startup by 2 months on water supply issue.
Erdos Sanwei Chemical Co. Ltd Inner Mongolia 0.4 0.1 2016 Commissioning
Qinghai Salt Lake Industry Co. Ltd Golmud, Qinghai 1 0.33 2016 Nov Commissioning
Shenhua Xinjiang Urumqi, Xinjiang 1.8 0.68 2016 Oct Started to commission on Oct 3 2016, 300ktpa PE, 380ktpa PP
Zhongtian Hechuang Inner Mongolia 1.8 0.68 2016 Oct Started to commission on Oct 20 2016
Qinghai Damei Xining, Qinghai 1.8 0.6 2016 300ktpa PE, 300ktpa PP
Sinopec & Henan Coal Chemical Hebi, Henan 1.8 0.6 2016
Gansu Pingliang Hua Hong Hui Jin Coal Chemical Co. Ltd Pingliang, Gansu 1.8 0.7 2Q2017
Total Petrochemicals, China Power Investment Inner Mongolia 3.0 1.0 After 2017
Non-Integrated Projects:
Methanol Olefin
Company Location Start Up Operation Remarks
(mtpa) (mtpa)
Zhongyuan Petrochemical (Sinopec) Puyang, Henan 0.6 0.2 2011 Oct Restarted from one-week outage Jul 2016
Ningbo Fude Ningbo, Zhejiang 1.8 0.6 2012 4Q Ramp up to 100 percent post G20
China Wison (Nanjing) Clean Energy Nanjing, Jiangsu 0.9 0.295 3Q2013 Restarted from 4-5 days outage in Sept. May 20 - 30 maintenance outage.
Shandong Yuhuang Dongming, Shandong 0.3 0.1 2014 Sept Shut down early 2016
Shandong Shenda (Legend Holdings) Zaozhuang, Shandong 1 0.4 2014 Oct Reduced to 80 percent on technical issue
Zhejiang Xingxing New Energy Jiaxing, Zhejiang 1.8 0.6 2015 Apr Cut operation by 20 percent. Outage 2016 Mar 3 - 21.
Shandong Yangmei Hengtong Chemical Co., Ltd Linyi, Shangdong 0.9 0.295 2015 Jun 28 Running at 70%
Shenhua Yulin Yulin, Shaanxi 1.8 0.6 2015 Dec 15 Started up 2015 Dec 15.
Ningbo Fude/DICP Licensee Changzhou, Jiangsu 0.9 0.3 2016 4Q Delayed to Dec 2016.
Shandong Huabin Shandong 0.54 0.18 2016 Completed construction, shut down on economics.
Ruichang Shandong 0.36 0.12 2016 Completed construction, shut down on economics.
Lu Shenfa Shandong 0.6 0.2 2016 Completed construction, shut down on economics.
Dongrun Shandong 0.9 0.3 2016 Completed construction, shut down on economics.
Better Clean Energy Shandong 0.9 0.3 2017 Under construction.
Phase I 800ktpa, Company indicated 2017 1Q.35ka EVA, 180kta EO, 260kta AN, 80kta MMA, 80kta SAP,
Jiangsu Shenghong Group Lianyungang, Jiangsu 3.6 1.2 2017 1Q
80kta OXO.
Jiutai Energy (Zhungeer) Co., Ltd Erdos, Inner Mongolia 1.0 0.3 end 2017 Delayed to end 2017.
China Wison (Nanjing) Clean Energy Nanjing, Jiangsu 1.8 0.6 After 2017 Environment assess approved. Construction to be commenced early 2017.
Operational Integrated 15.9 5.3

Non-Integrated 9.1 3.1
Global methanol values driven down by Atlantic Basin
oversupply earlier; China drives the latest rise
Global Methanol Pricing Comparison

600
550
500
450
400
USD per metric ton
350
300
250
200
150
Taken from MMSA Methanol Weekly Analysis (MMWA)
100
Jan-13
May-13
Jan-14
May-14
Jan-15
May-15
Jan-16
May-16
Nov-16E
Jul-13
Jul-14
Jul-15
Jul-16
Feb-14
Feb-15
Feb-13
Feb-16
Oct-13
Oct-15
Oct-16
Oct-14
Dec-14
Dec-15
Apr-13
Apr-16
Aug-13
Dec-13
Apr-14
Aug-14
Apr-15
Aug-16
Aug-15
Jun-13
Jun-14
Jun-15
Jun-16
Nov-15
Mar-13
Nov-13
Mar-14
Nov-14
Mar-15
Mar-16
Sep-13
Sep-16
Sep-14
Sep-15
Methanol US Contract Index, Avg Realized Price FOB USGC USD/metric ton
Methanol US Spot FOB USGC USD/metric ton
Methanol West Europe Contract (T2), Avg Realized Price FOB Rotterdam USD/metric ton
Methanol West Europe Spot (T2) FOB Rotterdam USD/metric ton
Methanol NEA/SEA MMSA Contract NTR Weighted Region Avg. USD/metric ton
Margins positive and contained
Global Methanol Pricing

900
800
700
Forecast
600
US Dollars per metric ton
500
400
300
200
100
Taken from MMSA Methanol And Derivatives Analysis (MDA)
0
Jul-01
Jul-02
Jul-03
Jul-04
Jul-05
Jul-06
Jul-07
Jul-08
Jul-09
Jul-10
Jul-11
Jul-12
Jul-13
Jul-14
Jul-15
Jul-16
Jul-17
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Delivered Cost Parity Imports to China
Methanol China Spot, Avg. CFR China Main Ports USD/metric ton
Methanol US Contract Index, Avg Realized Price FOB USGC USD/metric ton
Methanol West Europe Contract (T2), Avg Realized Price FOB Rotterdam USD/metric ton
Major Points
• Supply and Demand Overview 2011 – 2021E

– Methanol downstream comprised of “two faces”
• Traditional derivative demand remains steady, mirroring GDP “plus” growth rates
• Methanol to Olefins (MTO) is the main driver of methanol demand growth
– Regional supply and demand balance
• China balances slowly improving with demand growth outpacing supply growth
• US, Atlantic Basin balances upended by new US Gulf Coast Supply
– Intercontinental trade flow shifts anticipated
• “Methanol Bridge” that connects East and West has opened for alternative option,
but availability depends on arbitrage opportunity
• Expect further trade from Middle East/Africa to Asia as Atlantic Basin remains
majority
• Influence from Upstream and Downstream
– Supply cost and derivatives affordability sets boundaries to prices
– MTO competitiveness serves as a function of naphtha, propylene values
– Prices are connected globally
• As refined product values return to steady state, MTO affordability will recover,
supporting methanol market prices long term

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Global Methanol Outlook

Asian Nitrogen + Syngas 2016

Methanol Market Services Asia Pte. Ltd.

• 13th Year of Operation, based in Singapore

• Supply and Demand Overview 2011 – 2021E

Methanol Demand By Derivative - World

60,000 Methanethiol (Methyl

Methyl tert-Butyl Ether

Asia North America South America Europe Rest of World China

Total Demand Production

Methanol Supply and Demand - North America

Total Demand Production Production Capacity Net Trade

Methanol Supply and Demand - Europe

Total Demand Production Production Capacity Net Trade

Methanol Supply and Demand - Asia

Total Demand Production Production Capacity Net Trade

• Demand growth driven by investment in traditional

Total Demand Production Production Capacity Net Trade

• Little merchant capacity addition in China is expected in the

Taken from MMSA Methanol and Derivatives Analysis (MDA)

* Americas Supply * Persian Gulf Supply * Other Supply

• Prices Limited on high side by derivative affordability

140 Coal, Datong Premium Mix, FOB QHD Port

Crude Oil, Brent, USD/MMBtu

Coal, Datong Premium Mix, FOB QHD Port,

USD per MMBtu

China Adjusted Import Prices

China Adjusted Domestic Prices

$100 2016E China Demand

Methanol Volume vs. Value - China

Average Price for East China, Ex-Tank,

MeOH Pricing to MTO vs Market Price, CFR China Basis

MeOH "Equivalence" MeOH Market MTO Affordability Less Market

-400 Taken from MMSA China Monthly Methanol Analysis (CMMA)

Operational Integrated 15.9 5.3

Global Methanol Pricing Comparison

Global Methanol Pricing

• Supply and Demand Overview 2011 – 2021E

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