Chapter IV - Methanol and Derivatives Market Overviews and Uses · 2018-06-08 · Chapter IV -...

CHAPTER IV METHANOL AND DERIVATIVES –

MARKET OVERVIEW/USES

Chapter IV - Methanol and Derivatives – Market Overview/Uses

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METHANOL AND DERIVATIVES – MARKET OVERVIEW/USES METHANOL Methanol is a simple, one-carbon molecule that is at the trailhead of hundreds of value-chain pathways which travel through the realms of petrochemicals, alkalis, thiols, and life sciences chemicals, eventually leading to critical applications that modern society demands. Methanol enables the existence of a diverse set of commercial goods (from solvents to plastics to rubbers to transportation fuels), and is accordingly a strategic chemical for a vast array of petrochemical industry participants. More recently, methanol has been pulled into service as an energy source, owing to energy valuations that allow methanol to provide cost-effectiveness in use. Energy applications include blends with gasoline, direct combustion, as feedstock in the manufacture of dimethyl ether and olefins, and as feedstock for biodiesel manufacture. These energy application developments are covered in more detail in the applicable regional discussions in Chapter V of this study. Methanol is largely manufactured from natural gas, preferably in areas where gas is widely available in large quantities at low cost, but is increasingly made from the gasification of coal and from coking coal offgas streams, mostly in China. In this section, a description of historic uses for methanol and its key derivatives, over the five year period 2007 – 2011, is provided. A geographic breakdown of these uses historically is also included. Additionally, a review of methanol production capacity is provided over the same period. Applications/Markets The key current uses for methanol are depicted in the table on the next page. This is only a partial listing, with many smaller derivatives that comprise the balance, with the major groupings listed. The versatility of methanol and its derivatives becomes evident from this list, as it indicates that many commercial routes leading to modern-day consumer goods rely on the existence of methanol. The analysis will cover the primary derivatives of methanol. For formaldehyde, acetic acid, and methyl amines, discussion of secondary derivatives will be provided. For the other derivatives, the reader is encouraged to contact the author for details behind secondary derivatives (and beyond). A detailed listing of these others’ main uses is provided on the next page to underscore their significant utility.


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Primary Derivative Secondary Derivative Tertiary Derivative Quaternary Derivative

Acetic Acid Vinyl Acetate Polyvinyl Acetate Polyvinyl AlcoholEVA

Acetic Anhydride Cellulose Acetate (filter tow)Terephthalic Acid Polyesters (polyethylene terepthatlate)

Formaldehyde Phenol Formaldehyde ResinsUrea Formaldehyde ResinsMelamine ResinsPolyoxymethylene (POM or Polyacetal)PolyolsButanediol Polyesters (polybutyl terepthalate)MDIIsoprene Rubber (polyisoprene)ParaformaldehydeHexamine

Methyl tert-butyl ether (MTBE)

Methyl Methacrylate Polymethylmethacrylate (PMMA)Methacrylate/Acrylate Co Polymers

Methyl Chloride (Chloromethane) Methylene Chloride (CH2Cl2) Chloroform (CHCl3) Carbon Tetrachloride

MethylaminesMonomethyamine Caffeine (stimulant, diruretic)

Sevin/carbaryl (insecticide)Various other insecticidesVarious other herbicidesVarious other pesticidesWater gel explosivesPhotographic developersAnalgesics (Demerol)Antispasmodics

Dimethylamine FungicidesDimethyl Formamide (solvent)Rubber accelerators, processing agentsPropellantsanithistamatic (Benadryl)Catalysts (Urethane)SurfactantsWater TreatmentDetergentsGermicidesHerbicidesEpoxy Resin Accelerators

Trimethylamine Acid Scavenger (Nylon, Benzyl Esters)Choline ChlorideIon Exchange Resins (with crosslinked polystyrene)Gelling Inhibitor (Polyester)

OthersDimethyl terephthalate (DMT) PolyestersReducing agent Purified Terephthalic Acid (PTA)Methyl Mercaptan (methanethiol) Chlorine Dioxide

DL-methionine (amino acid)Developmental Uses

Direct Uses (gasoline blending)Fuel CellsMethanol-to-OlefinsMethanol-to-Gasoline

Major Methanol Derivative Uses

The last category in this listing, “Developmental Uses”, is now a major contributor to global methanol demand growth. Methanol can be used in a variety of alternative energy product schemes, namely: - Blends of methanol with gasoline (from 15 percent to over 85 percent by volume)

are in use, a practice particularly prevalent in China. - Dimethyl ether, (DME) made from methanol, is now being manufactured, mostly

as a replacement for LPG in dilute mixtures of LPG with DME, as the material has many of the features of LPG at lower costs (from production through consumption). Quite a significant number of DME producers exist in China.


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- Coal or Gas to Olefins (via methanol) Methanol is now used commercially in China as a feedstock to make ethylene and propylene via catalysis, also known as methanol-to-olefins (MTO). MTO utilizes methanol as an intermediary in the production of olefins and their derivatives (ethylene, and/or propylene, polyethylene, and polypropylene). Five commercial scale MTO plants in China are operating on commercial basis as of early 2013, with a number of confirmed projects underway.

- Coal or Gas to Gasoline (via methanol) – Similar to MTO, methanol can be catalyzed to yield hydrocarbon streams with high percentages of gasoline. This technology was first utilized in New Zealand in the mid 1980’s, and a second generation facility (pilot scale) was commissioned in China in late 2009. In the United States, several sponsors of this technology have also emerged.

- Biodiesel, defined as the esterification reaction of methanol with vegetable or other plant oils to make “diesel” (methyl ester), which has no sulphur among other benefits. This application is well known in Europe, the US, South American, with rapid development in Asia. It is currently restricted by poor economics relative to diesel in most parts of the world.

- Fuel cell uses for methanol are for the first time being marketed on a wide scale for retail uses, particularly the development of methanol driven laptop and phone power, but also for remote, direct current power generation on small scales (e.g. battery replacement).

- Direct combustion of methanol, particularly for power generation, is possible. As far back as 1985, successful tests of methanol in gas turbines have been conducted. Trials of smaller electricity generating turbines are underway in Trinidad. Larger volumes of small scale use of methanol for cooking and heating have been developing in China in recent years as well, owing to cost effectiveness of methanol versus conventional fuels.

The use of methanol in these fuel-replacing applications has radically altered the demand landscape for methanol. Currently, these developing applications are predominant in China, driven by relatively wide differences between the energy values of coal and crude and crude products; i.e. methanol provides a “bridge” for coal to compete with conventional sources of energy. Cumulatively these applications represent the fastest growing demand sector of the methanol industry, both percentage and volume wise. Methanol Demand by Derivative - Overview Continuing a trend of late, methanol demand grew strongly in 2012, with consumption recorded at 60.6 million tons globally representing staggering growth of 5.87 million tons from the previous year. The predominant use of methanol continues to be as a feedstock for the manufacture of formaldehyde, which is also a chemical intermediate, largely used in the manufacture of adhesives for wood panels and wood products. The main methanol growth driver (and second largest demand source) lies in


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alternative fuels. Notably, methanol demand is now receiving its biggest boost from its use in methanol to olefins (MTO) operations in China. The third largest use of methanol is to produce methyl tert-butyl ether (MTBE); a high-octane component of gasoline formulations. Although this substance has not been used in the US since 2005, many other locations (especially China) have expanded their use, and this trend is expected to continue. The fourth largest methanol methanol derivative is acetic acid, increasingly used as a reaction solvent for making polyester fiber intermediates, as well as traditional cigarette tow and polyvinyl alcohol intermediates. Other uses for methanol, as outlined in the table at the beginning of this section, are much smaller in volume and demand far less methanol. The historical distribution of methanol use by derivative, globally, is shown in the chart below.

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Global Methanol Demand by Derivative

Formaldehyde Acetic Acid Methyl tert-Butyl Ether (MTBE)Methyl Methacrylate Dimethyl terephthalate (DMT) Methanethiol (Methyl Mercaptan) Methylamines Methyl Chloride (Chloromethane) Gasoline Blending & CombustionBiodiesel DME Fuel CellsMethanol-to-Olefins Others

The contributions of each derivative to methanol consumption growth are summarized numerically in the table on the next page. The growth (or shrinkage) of methanol consumption, in thousands of metric tons, is shown for the key derivatives of methanol over the last five years. To provide a regional perspective, these quantities are also shown for the study regions as well.


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2008 2009 2010 2011 2012 5 Yrs Total Formaldehyde 74 -996 2,121 1,285 841 3,325Acetic Acid 275 -33 742 203 118 1,304Methyl tert-Butyl Ether (MTBE) -94 -235 516 407 497 1,091Methyl Methacrylate -1 -67 148 52 45 177Dimethyl terephthalate (DMT) -1 -20 -14 4 1 -30Methanethiol (Methyl Mercaptan) 16 -7 -5 24 16 44Methylamines 27 -35 148 81 41 261Methyl Chloride (Chloromethane) 27 -22 91 75 59 230Alternative Fuels

Gasoline Blending & Combustion 292 1,813 1,254 986 1,168 5,512Biodiesel 91 -77 71 307 104 497DME 892 1,513 640 320 260 3,624Fuel Cells 3 -5 1 1 0 0

Methanol-to-Olefins 2 0 695 1,777 2,428 4,902Others -131 -214 483 277 288 702

Asia 1,606 3,577 5,603 5,147 5,301 21,234North America -464 -701 669 335 171 11South America 94 -153 134 35 18 127Europe 114 -653 63 64 267 -145Russia 74 -416 183 98 37 -24Middle East 66 -43 253 113 65 455Africa -18 3 -15 7 5 -18

TOTAL 1,472 1,614 6,890 5,799 5,866 21,641

Growth in Methanol Demand (-000- metric tons)2008-2018E

Most formaldehyde consumption growth has been in Asia, particularly China, whose burgeoning economy is increasing demand for locally consumed construction products, including plywood, which contains formaldehyde based resin, particleboard, furniture, and other resin containing products, plus electronic goods that contain formaldehyde derivatives. Of course, China has also expanded its role as a formidable exporter for those materials, especially in price sensitive segments. After slow growth through 2009 due to the global financial crisis, the expansion in methanol usage for formaldehyde returned in 2010 and continued in 2011. Cooling down measures targeted towards China’s real estate sector impacted global formaldehyde demand towards the end of 2012. MTBE use fell precipitously thorugh 2004 due to regulations in the United States that restricted its use in the state of California, coming to a halt in 2006 with a nationwide ban on its use as an octane booster. However, growth in MTBE based demand for methanol began to increase on a global basis in 2010, as the impact of the US decision neared its end, and the world outside of the US recovered from the global economic slowdown, particularly from an increasing requirement for gasoline in China. In the last few years, several MTBE production facilities have appeared, mostly in China for captive consumtion, although large “merchant” MTBE plants remain. Combined


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with strong demand growth in China for gasoline, and Asia for eventual MMA production (ie. with the final end-usage including optical grade PMMA sheets, especially for flatscreen displays), tight markets for MTBE can reasonably be expected to continue over the next few years. Acetic acid based demand for methanol also registered growth globally in the previous five years. This is mainly due to its growing need as a solvent for terephthalic acid processes (a feedstock for polyester production), particularly in China, as well as strong growth in traditional uses, such as making vinyl acetate monomer (VAM). Nevertheless, an oversupply of acetic acid in China has clouded this demand growth, and domestic producers relied on exports to alleviate the situation. In total, over the past five years, approximately 21.64 million metric tons of methanol demand has been created globally; this translates to a compounded annual growth rate of 9.2 percent. Much greater detail on drivers of historical methanol demand, as well as the outlook for methanol demand, can be found in chapter V of this study, “Regional Methanol and Derivatives Analysis”. Methanol Capacity - Overview A significant geographical shift in capacity to produce methanol towards China has continued through 2012, with the tide somewhat changing upon the development of low cost natural gas feedstock in the United States and elsewhere. Notably, mothballed facilities in North America and New Zealand are being restarted, and some assets in South America are being relocated to the US Gulf Coast in order to take advantage of perceived natural gas affordability. Over the period, major capacity additions in China, the Middle East, and South America took place. An onslaught of capacity in the early part of the historic period has been replaced by relatively slower additions to capacity. In early 2009, much China capacity shut in, only to recover with the swift rebound in global economies and strong domestic demand. In 2010 and 2011, the gap between available capacity and demand reached all time highs, this did not translate to physical length due to the presence of “phantom capacity” – those methanol manufacturing plants taking frequent and unannounced shutdowns and/or running at reduced rates due to feedstock or other operational issues. Now, most capacity additions globally continue to emanate from China, although these are almost exclusively earmarked for dedicated downstream demand (especially MTO). Total capacity available to produce methanol in 2012 was slightly over 95 million metric tons globally. Over the last five years, methanol production capacity was added at a much faster pace than demand, at 44.0 million metric tons of net nameplate additions. A breakdown of capacity distribution by region for 2012 is shown in the chart below. Clearly, China has become the major presence globally, now well exceeding the Middle East and Americas in capacity to produce methanol.


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China46,158

Malaysia2,490Indonesia

720

Australia70New Zealand

1,050Other SEA

1,000

India607

Russia4,688

Saudi Arabia7,390

Iran5,144

Qatar900

Oman2,095

Other ME440

USA1,240

South America13,617

Europe3,980

Africa3,210

2012 Methanol Capacities by Region‐000‐metric tons

The appendices of this study provide detailed lists of producers globally, by production location. In the following sections, methanol derivatives will be overviewed. Supply and demand expectations for methanol, formaldehyde, and acetic acid and these products’ derivatives for the period 2008 – 2018E will be covered in Chapter V, ”Regional Analysis.” Full tables of methanol, formaldehyde, acetic acid, and MMA supply and demand can be found in the study appendices.


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FORMALDEHYDE Formaldehyde, like methanol, is a versatile chemical that enables manufacture of an even larger variety of useful commercial chemicals. It was discovered in 1859, and has been manufactured since the beginning of the twentieth century. Formaldehyde derivatives serve a wide variety of end uses such as wood products, plastics, and coatings, serving construction, automotive, electronic, textile, and herbicides markets, among many others. Formaldehyde is considered one of the world’s most important industrial and research chemicals, owing to its low cost, high purity, and the vast number of chemical reactions it can participate in. Applications/Markets As the table (below) summarizing formaldehyde derivatives and their intended uses shows, tracking global demand for formaldehyde offers a significant challenge. This study will focus on the derivatives above the “others” label, which cover roughly 80 percent of all formaldehyde consumed globally. Formaldehyde Derivative End Use Applications

Urea Formaldehyde Resins (UF) Adhesives and Coatings for Wood ProductsPhenol Formaldehyde Resins (PF) Adhesives and Coatings for Wood ProductsMelamine Formaldehyde Resin (MF) Adhesives and Coatings for Wood Products

Polyoxymethylene/Polyacetal (POM)Automotive parts, household/electronic appliances, building products

PolyolsPentaeryithrytol Paint resins, synthetic lubricants, explosive precursorTrimethylolpropane (TMP) Paint resins, synthetic lubricants, plasticizers, coatingsNeopentylglycol (NPG) Urethane coatings, polyurethane foamsTrimethylolethane (TME) Coatings

1,4 Butanediol (1,4 BDO) THF, g-butylrolactone, PBT, Lycra™Methylenebis (4-phenyl isocyanate)/Methyl diisocyanateRigid urethane foams, elastic fibers, elastomersParaformaldehyde Resin manufactureHexamethylenetetramine (Hexamine or HDTA) Thermosetting catalyst for phenolic resins, RDX (cyclonite) high

explosives, molding compounds, rubber vulcanization accelerators, animal medication

OthersGlyphosate Herbicide (e.g. Roundup™)Extraction Solvent Isoprene RubbersPyridines Agricultural chemicals, herbicidesChelating Agents (EDTA and NTA) Industrial & household cleaners, water treatmentAcrylics PlasticsNitroparaffin PlasticizersUF based controlled release fertilizers, UF ConcentrateFertilizersFormaldehyde-alcohol solutions UF and MF resinsTetraoxane Textile treatmentDimethylol dihydroxyethylene Permanent Press textilesFormaldehyde and Other Derivatives Fungicides

Embalming fluidsSilage preservativesDisinfectantsCorrosion inhibitorHydrogen sulfide scavengerBiocide in oil production operations (drilling, waterflood, and enhanced oil recovery)

In addition to the vast utility of formaldehyde and derivative use, from this list, it should be evident that formaldehyde consumption is highly aligned with both wood


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panel consumption (via UF, PR, and MF use), and also with the production of automobiles, electronics, textiles, and appliances (which increase demand for POM, polyols, MDI). The following chart, showing formaldehyde consumption globally by end use for the historic study period, reinforces the importance of resins to formaldehyde demand. UF and PF resins represent the vast majority of approximately 7.4 million metric tons of formaldehyde consumption growth in the period. On a global basis, approximately 55 percent of all formaldehyde consumed is used in resins. The remaining non-wood uses of formaldehyde are tremendously diverse, ranging from engineering thermoplastics to chemical intermediates to pesticides.

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Global Formaldehyde Demand by Derivative

Urea Formaldehyde Resins & Concentrates POMPentaerythritol TMP, TME, NPG1,4 BDO MDIPhenol Formaldehyde Resins ParaformaldehydeHexamine Melamine Formaldehyde ResinOthers

The table on the next page, which shows formaldehyde growth over the past 5 years as a function of both derivative and region, provides further insight to recent formaldehyde consumption growth patterns. A collapse in US housing, European construction, and global automotive and textile markets dampened formaldehyde growth in 2008 and 2009. Fortunes reversed in 2010 thanks to the rebound of developed economies in Europe and the US after economic stimulus, along with the still-booming Chinese economy. The nest two years saw continued expansion of formaldehyde usage, at an increasingly moderated pace, mirroring the general economic situation. Like so many other commodities, formaldehyde demand growth is centered in Asia, mostly China.


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2008 2009 2010 2011 2012 5 Yrs TotalUrea Formaldehyde Resins & Concentrates -21 -865 1,922 1,335 816 2,249POM 39 -158 284 146 94 595Pentaerythritol 70 -28 223 141 99 495TMP, TME, NPG 20 -72 63 38 27 981,4 BDO 33 -47 295 97 52 349MDI 122 86 179 112 111 573Phenol Formaldehyde Resins -202 -669 844 437 311 116Paraformaldehyde 62 -32 137 80 67 342Hexamine 43 -7 81 55 45 249Melamine Formaldehyde Resin -9 -23 166 95 51 290Others 9 -398 519 320 195 354

Asia 352 62 2,901 2,281 1,344 5,843

North America -408 -525 828 151 307 -693

South America 51 -6 98 94 49 128

Europe 3 -1,152 579 208 70 97

Russia 103 -610 243 83 66 131

Middle East 60 16 59 33 28 186

Africa 4 1 4 5 4 19

TOTAL 165 -2,214 4,713 2,856 1,868 5,711

Growth in Formaldehyde Demand (-000- metric tons)2008-2012

Formaldehyde Demand by Derivative - Overview Resins The largest sector of formaldehyde consumption is clearly into resins – specifically, urea formaldehyde (UF), phenol formaldehyde (PF), and melamine (urea) formaldehyde (MF and MUF) resins. These resins are primarily used in the construction of wood products, although a much smaller portion of their use falls into non-wood or “chemical” consumption. There are four major categories of wood products that consume formaldehyde-containing resins: particleboard (PB), plywood, medium density fiberboard (MDF), and oriented strand board (OSB). These products are typically panels that require resins to bond layers and/or bind strands and particles together. Additionally, formaldehyde-based resins are used to coat wood panel surfaces for waterproofing and/or aesthetic purposes. Within these four categories, there exist three major types of resins that are used to adhere, seal and coat the many and complex variations of wood panels:

Urea Formaldehyde (UF) Resins, made from the reaction of formaldehyde and urea, are used predominantly in plywood and particleboard products. UF


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resins are typically the lowest cost and most commonly used wood resins. Continuous production of urea-formaldehyde resins has been described in many patents. In a typical example, urea and formaldehyde are combined and the solution pumped through a multistage unit. Temperature and pH are controlled at each stage to achieve the appropriate degree of polymerization. The product is then concentrated in a continuous evaporator to the appropriate solids content. Urea formaldehyde resins can be finished in solid form, but increasingly are supplied in a water based concentrate (urea-formaldehyde concentrate or UFC), which can be made within the formaldehyde production complex via the addition of an aqueous solution of urea. Resins typically contain 70 percent by weight formaldehyde and 2.4 parts formaldehyde per part urea; UFC resins are typically 70 to 85 percent solids, have trace amounts of methanol and formic acid, and must be kept cool during transport. Urea-formaldehyde resins are also used as molding compounds and as wet strength additives for paper products. UFC are used as anti-blocking agents for urea fertilizer, as well as directly as adhesives (via heat curing). Phenol Formaldehyde (PF) Resins, which fall under the phenolic resin category, are used in high-end plywood applications such as outdoor and water exposed panels. The markets for these resins are predominantly in developed countries, but have begun expanding in some emerging markets. Plywood is the largest market for phenol-formaldehyde resins. The phenolic resins family is comprised of polymers and oligomers, each made from a wide variety of structures based on the reaction products of phenols with formaldehyde. Phenolic resins are employed in a wide range of applications, from commodity construction materials to high technology applications in electronics and aerospace. Generally thermosetting in nature, phenolic resins provide numerous challenges in the areas of synthesis, characterization, production, product development, and quality control. PF resins are also used as molding compounds. Their thermal and electrical properties allow use in electrical, automotive, and kitchen parts. Other uses for phenol-formaldehyde resins include phenolic foam insulation, foundry mold binders, decorative and industrial laminates, and binders for insulating materials. Melamine (Urea) Formaldehyde (MF or MUF) Resins, the product of reacting melamine with formaldehyde, is a resin that forms a highly heat and water resistant wood panel. MF resins are often used for plywood used in concrete panels (molds), especially in Japan. MUF resins are typically highest in cost and the least commonly used wood resin. Melamine-formaldehyde resins find use in decorative laminates, thermoset surface coatings, and molding compounds such as dinnerware.


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Trioxane Trioxane is the cyclic trimer (made from three formaldehyde molecules) of formaldehyde. It is a colorless crystalline solid that can be produced by continuous distillation of 60% aqueous formaldehyde containing 2-5% sulfuric acid. It is mainly used for the production of acetal resins, and has found use in textile treatment in Japan. Acetal Resins/Polyoxymethylene (POM) Acetal resins are either homopolymers or copolymers of formaldehyde. Typically, the resin is produced from anhydrous formaldehyde or trioxane. POM is the most commercially well known of the acetal resins. They are high performance plastics characterized by high rigidity, high mechanical strength (and wear resistance) and good toughness (even at low temperatures), good impact strength, and enhanced chemical (and gasoline) resistance. These materials offer the high dimensional stability required for precision molded parts. Increasingly, the parts are used to replace metals and reduce weight in the automobile. As a result of its versatility, POM is used in a wide range of goods; for example, in the production of parts for pumps and filter housings, gears and transmission systems, precision parts for measuring equipment and control technology, clock and watch movements, and even zip fasteners. POM is increasingly used in products for motor vehicles, such as suspension stabilizer bar links, guide rails for sunroofs, components in seat belt mechanisms and a variety of automotive fasteners. Further, parts made from POM can be found in plumbing and irrigation components, lawn and garden equipment, stock rod and slab shapes and children's toys. Factors limiting use of acetal resins include some difficulty in processing, a high specific gravity, and the difficulties in flame-proofing. Polyacetal resins also cannot be painted, although pigmentation is possible. Polyurethane Components – MDI, Polyols, 1,4 BDO Polyurethanes (PU) are at group of versatile man-made compounds which heavily impact the use of formaldehyde. PU was initially developed in Germany in the 1930’s, with important commercial processes introduced in the 50’s by BASF and Dow Chemical, and in the late 60’s by Bayer, with several improvements since then. PU compounds fall into a class called “reaction polymers,” which means that they are formed by chemical reaction of two components into a longer chain molecule with new and useful properties. For PU, the reaction components which contain formaldehyde based products are methylene diphenyl diisocyanate (MDI) and polyols. MDI and polyols are reacted to make PU, consuming formaldehyde in the process.


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Polyurethane products have many uses, with an estimated 17.8 million tons of PU consumed globally. Over three quarters of the global consumption of polyurethane products is in the form of foams, with flexible and rigid types being roughly equal in market size. In both cases, the foam is usually behind other materials: e.g. flexible foams are behind upholstery fabrics in commercial and domestic furniture; rigid foams are inside the metal and plastic walls of most refrigerators and freezers, or behind paper, metals and other surface materials in the case of thermal insulation panels in the construction sector. Polyurethane is also used for moldings which include door frames, columns, balusters, window headers, pediments, medallions and rosettes. Polyurethane is also used in the concrete construction industry to create formliners. Polyurethane formliners serves as a mold for concrete, creating a variety of textures and art. The precursors of expanding polyurethane foam are available in many forms, allowing “in situ” application. For instance: insulation, sound deadening, flotation, industrial coatings, packing material, and even cast-in-place upholstery padding. Since they adhere to most surfaces and automatically fill voids, they have become quite popular in these applications. Sector-wise, about a quarter of PU consumption goes to the building and construction industries, another ¼ to transportation equipment, roughly 20 percent to bedding and furniture, and the balance to a wide range of commercially significant items such as appliances, packaging, textiles, electronics, machinery, footwear, adhesives, and others. Below, descriptions of the PU components most impacting formaldehyde are discussed. Methylene diphenyl diisocyanate (MDI) The compound methylenebis is also known as methylene diphenyl diisocyanate (MDI). Its principal end use is rigid urethane foams; other end uses include elastic fibers and elastomers. Demand is in large part driven by automobile and furniture production as well as building and construction. MDI is produced by the condensation of aniline and formaldehyde with subsequent phosgenation. The main feedstock for aniline is nitrobenzene, which is produced by the nitration of benzene. Nitrobenzene is then hydrogenated to form aniline. Aniline is then condensed with formaldehyde to form MDI. MDI has three structural variants which can be mixed and compounded to meet application requirements. MDI is further reacted with polyols to form polyurethane compounds. Pure MDI occurs as white to pale yellow crystals or flakes with a slightly musty odor. MDI and polymeric isocyanates are very toxic. MDI reacts violently with acids, alcohols, amines, bases and oxidants causing fire and explosion hazard. Polyols Several important polyols (polymers of ring-containing alcohols or polyhydric alcohols) are made from formaldehyde. The principal ones include pentaerythritol


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(Penta or PE), made from acetaldehyde and formaldehyde; trimethylolpropane (TMP), made from n-butyraldehyde and formaldehyde; and neopentyl glycol (NPG), made from isobutyraldehyde and formaldehyde. In addition to use in polyurethane compounds, these polyols find use in the alkyd resin and synthetic lubricants markets. Penta is used for a massive range of items, mostly the manufacture of alkyd paints, followed by alkyd inks, alkyd adhesives, plasticizers, alkyd varnishes, radiation cure coatings, lubricants, and rosin/tall oil esters and explosives (pentaerythritol tetranitrate), among others. NPG finds largest use in plastics produced from unsaturated polyester resins and in coatings based on saturated polyesters, along with other lubricant and hydraulic fluid applications, and is shipped in flake, molten, and slurried forms. TMP is also used in urethane coatings, polyurethane foams, and multifunctional monomers. 1,4-Butanediol 1,4-Butanediol (1,4 BDO or BDO) can be made from formaldehyde and acetylene and represents a significantly growing market for formaldehyde. BDO is used to produce tetrahydrofuran (THF), which is used for polyurethane elastomers; g-butyrolactone, which is used to make various pyrrolidinone derivatives; poly(butylene terephthalate) (PBT), which is an engineering plastic; and other polyurethane compounds. A strong point of growth is BDO use in the preparation of PTMEG, a precursor for elastic polyester textile production (e.g. Lycra™). However, formaldehyde growth in the acetylenic chemicals market is challenged by alternative processes (BP GEMINOX, which uses hydrogen, air, and n-butane as feedstock) to produce 1,4-butanediol. Some bio-based BDO processes are being commercialized. Hexamethylenetetramine Pure hexamethylenetetramine (hexamine, urotropine, and HMTA) is a colorless, odorless, crystalline solid. It sublimes (vaporizes) with decomposition but does not melt. HMTA is readily prepared by treating aqueous formaldehyde with ammonia followed by evaporation and crystallization of the solid product. Its principal use is as a thermosetting catalyst for phenol-formaldehyde resins. Other significant uses are for making RDX (cyclonite) high explosives, catalysis of amino resin production, insecticides, use in molding compounds, and for rubber vulcanization accelerators. Some HMTA is made as an intermediate in the manufacture of nitrilotriacetic acid. Chelating Agents The chelating agents produced from formaldehyde include the aminopolycarboxylic acids, their salts, and organophosphonates. The largest demand for formaldehyde is for ethylenediaminetetraacetic acid (EDTA); the next largest is for nitrilotriacetic acid (NTA). Chelating agents find use in industrial and household cleaners and for water treatment.


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Formaldehyde-Alcohol Solutions These solutions are blends of concentrated aqueous formaldehyde, the alcohol, and a hemiacetal compound (which results from covalently bonded formaldehyde molecules). Methanol decreases the average molecular weight of formaldehyde oligomers by formation of lower molecular weight hemiacetals. These solutions are used to produce urea and melamine resins; the alcohol can act as the resin solvent and as a reactant. The low water content can improve reactivity and reduce waste disposal and losses. Paraformaldehyde Paraformaldehyde, is a solid mixture of linear poly (oxymethylene glycols) of fairly short chain length, HO(CH2O)nH (the range of n is 8-100). Once dissolved in water, paraformaldehyde behaves like methanol-free formaldehyde of the same concentration. Resin manufacturers seeking low water content or more favorable control of reaction rates use paraformaldehyde, which can be shipped more readily than aqueous solutions. It is often used in making phenol-, urea-, resorcinol-, and melamine-formaldehyde resins. Gaseous formaldehyde can be generated from paraformaldehyde by heating. A current process for paraformaldehyde is based on continuous, staged vacuum evaporations, starting with 50% aqueous formaldehyde. Slow-Release Fertilizers Products containing urea-formaldehyde are also used to manufacture slow-release fertilizers. These products can be solids, liquid concentrates, or liquid solutions. Other Applications Formaldehyde is used for the manufacture of a great variety of other chemicals. Formaldehyde derivatives, such as dimethylol dihydroxyethylene, are used in textiles to produce permanent press fabrics. Other formaldehyde derivatives are used in this industry to produce fire-retardant fabrics. Pyridine chemicals, made from formaldehyde, acetaldehyde, and ammonia, are used for agricultural chemicals. Formaldehyde and paraformaldehyde have found use as a corrosion inhibitor, hydrogen sulfide scavenger, and biocide in oil production operations such as drilling, waterflood, and enhanced oil recovery. Other uses for formaldehyde and formaldehyde derivatives include fungicides, embalming fluids, silage preservatives, and disinfectants. Formaldehyde Capacity - Overview The world's largest commercial processes make formaldehyde from methanol and air using either a process employing a silver or metal oxide catalyst. Details behind


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formaldehyde manufacturing routes are included in Chapter VIII, “Process and Economics Overview.” The chart on the next page shows the regional breakdown of formaldehyde capacity in 2012. The Asian region has the largest capacity to produce formaldehyde globally. China is clearly the dominant supplier within Asia.

2,860

5,507

1,047

1,602

11,262

22,461

2012 Formaldehyde Capacities by Region-000- metric tons

China Japan Taiwan South Korea MalaysiaSingapore Indonesia Australia New Zealand Other SEAIndia Other South Asia Russia Saudi Arabia IranQatar Oman Other ME United States CanadaMexico South America Europe Africa

Europe

Russia

UnitedStates

Japan

Asia

Canada

China

South America

The appendices of this study provide detailed lists of producers globally, by production location. Because of the toxic nature of formaldehyde, most is consumed on the production site, and deep sea trade of formaldehyde is irregular and limited to mainly unplanned circumstances. There is some movement via smaller quantities, such as rail cars and iso tankers, however these are rarely over long distances. However, the trade of formaldehyde derivatives, particularly paraformaldehyde and resins (in the form of finished wood products) is commonplace. More detailed discussion of formaldehyde and derivative trends by region and country for the study period, including the five-year outlook, is provided in Chapter V, “Regional Market Analysis.”


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ACETIC ACID Acetic acid is a well-developed intermediate used in several commercially significant chemical processes. Eventual applications for acetic acid derivatives include textiles, latex emulsion resins for paints, adhesives, paper coatings, textile finishing agents, cellulose acetate fibers, cigarette filter tow, and cellulosic plastics. In its pure form, acetic acid is corrosive and characterized by its sharp odor, burning taste, and harmful blistering properties. Other names for acetic acid include glacial acetic acid, ethanoic acid, ethylic acid, methanecarboxylic acid, and vinegar acid. Applications/Markets Acetic acid is used as a chemical intermediate and solvent with widespread applications throughout industry. Like formaldehyde, acetic acid follows a number of commercial pathways leading to significant commercial final goods. The table below describes the major derivatives of acetic acid and their intended uses:

From this list, it can be inferred that drivers for acetic acid are mostly non-durable and disposable goods (e.g. paints, adhesives, cigarette consumption, aspirin, fibers and plastic bottles). The chart on the next page, “Global Acetic Acid Demand by Derivative,” shows acetic acid consumption globally by end use for the historic study period, and underscores the role that VAM and TPA have played in global acetic acid demand growth. Until the middle of 2008, VAM had benefited from strong economies and corresponding construction demand globally, and TPA demand had been accelerating because of the growth of polyester use, mostly for the production of plastic bottles, but also in fiber applications. As economic growth tailed off towards the end of 2008, so did these applications. Since then, consumption has rebounded strongly, mirroring the trend in the robust global economic growth. On a global basis, anhydride, ester, and other major consumers of acetic acid show positive, although slower, growth than VAM and TPA.

Primary Derivative Secondary Derivative Tertiary Derivative End Use ApplicationsVinyl Acetate Monomer (VAM) Polyvinyl Acetate Polyvinyl Alcohol Paints, adhesives, textiles, paper

EVA Barrier and other filmsAcetic Anhydride Cellulose Acetate Cigarette filters, acetate fibres,

paracetamol/asprin and preservativesTerephthalic Acid Polyesters (polyethylene terepthatlate) Fibers, film, plastic bottlesAcetate Esters Automotive paints, printing inks

Major Acetic Acid Derivative Uses


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0

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2008 2009 2010 2011 2012

Mill

ion

Tonn

esGlobal Acetic Acid Demand by Derivative

Vinyl Acetate Monomer Terephthalic Acid Acetic Anhydride Acetate Esters Others

In the historic study period, just over 2 million metric tons of new demand for acetic acid developed globally. The table on the following page breaks down growth in acetic acid demand over the past five years into derivative and region, and provides further insight to recent acetic acid consumption growth patterns. It is clear that the Asian region, led by China, provided the most demand growth. This is particularly the case for TPA, as China has added significant polyester production capacity to meet rapidly growing demand, and is investing upstream in new TPA capacity as well. Additionally, acetate esters (oxygenated solvents) are growing in China as reductions in chlorinated and hydrocarbon solvents are enacted. Acetic anhydride use in cigarette tow has also grown demand for acid as China increases its production of cigarettes. Demand growth in the Middle East reflects investments in acetyls derivatives (mainly VAM) in Saudi Arabia. In other regions of the world, demand growth has been much more moderate.


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2008 2009 2010 2011 2012 5 Yrs Total

Vinyl Acetate Monomer -146 -435 578 243 151 392

Terephthalic Acid -27 98 363 161 129 723

Acetic Anhydride 40 23 142 82 59 346

Acetate Esters 35 -2 110 60 48 252

Others 46 154 138 -33 33 338

Asia 38 144 847 346 338 1,714

North America -131 -134 284 -30 54 43

South America -7 1 8 22 7 31

Europe -17 -148 -24 104 58 -28

Russia 43 -26 15 16 6 52

Middle East 22 1 201 55 -41 237

Africa 1 0 0 1 0 2

TOTAL -51 -163 1,331 513 421 2,051

Growth in Acetic Acid Demand (-000- metric tons)2008-2012

Acetic Acid Demand by Derivative - Overview Vinyl Acetate Monomer (VAM) VAM is the largest outlet for acetic acid, and VAM is used in paints, adhesives, textiles, paper, films and even chewing gum. Most VAM plants are integrated with acetic acid facilities, and are near olefin production facilities, as acetic acid is reacted with ethylene and oxygen using catalysts. VAM is used to make polyvinyl acetate (further processed to make polyvinyl alcohol and “vinylon” fibers), polyvinyl butyral, ethylene vinyl acetate (EVA, used in making olefin based plastics), and ethylene vinyl alcohol (EVOH). End-use applications for VAM such as paints, paper and adhesives are used mainly in construction applications, and are growing at rates similar to economic growth, although ethylene vinyl alcohol (which is further processed into barrier film applications) has displayed exceptional growth in recent years. Purified Terephthalic Acid (TPA) The next largest and fastest growing outlet (rate and volume wise) for acetic acid is purified terephthalic acid (TPA), which has seen consistent growth from the polyester industry. TPA is made from paraxylene and oxygen (air), in the presence


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of acetic acid (as a reaction solvent), and a small amount of make-up acetic acid is required at TPA manufacturing locations. A gain for TPA has been the development of polyethylene terephthalate (PET) bottles for the carbonated drinks market, and major investments and expansions in TPA production capacity have contributed to a strong demand growth for acetic acid in China. The original polyester textile market still grows at the expense of cotton and nylon, which it replaces. Acetate Esters Acetic acid is reacted with alcohols to make esters. The most common esters made from acetic acid are propyl- and butyl esters, which are principally used as solvents (also known as oxygenated solvents) in applications including automotive finishes in the paint industry and in printing inks. Acetic Anhydride Acetic anhydride is one of the first and most developed of the acetic acid derivatives, with a high level of process diversity. It is primarily used (over 80 percent) in the production of cellulose acetate, which itself is primarily used to make cigarette filters (tow), as well as acetate fibers/yarns, pharmaceuticals like paracetamol/aspirin and preservatives. Acetic anhydride is first made by removing water from acetic acid (typically pyrolysis), but can also be made by carbonylation of methyl acetate, made from methanol and acetic acid recycled from reactions involving acetic anhydride (acetylation reactions – e.g. for aspirin and acetaminophen manufacture, as well as textile sizing agents). Anhydride has been used for the illegal manufacture of heroin (acetylmorphine) and certain other addictive drugs. As a result, regulations on acetic anhydride commerce exist in Europe and the US. Acetic anhydride is a useful solvent in certain nitrations, acetylation of amines and organosulfur compounds for rubber processing, and in pesticides. Other Applications The largest other discrete segment of acetic acid consumption is for monochloro-acetic acid, made via chlorination of acetic acid, and used mainly as weed killing herbicides. There are hundreds of other applications including fragrances, foodstuffs, dyes, deicers, and detergents. Acetic Acid Capacity - Overview In 2012, capacity to produce acetic acid totaled 16.3 million metric tons of “merchant” production (this total includes both carbonylation and non-carbonylation technologies, but omits the relatively small amount of “by-product” production of acetic acid via alternate processes - which tends to be recycled back and thus captively used). Commercial production of acetic acid has been revolutionized and dominated by the methanol carbonylation technology, wherein carbon monoxide and methanol are combined to form acetic acid. BP Cativa™,


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Celanese AO Plus™, and Chiyoda’s ACETICA are among the most widely used methanol carbonylation technologies employed commercially. Older and less competitive processes employ the oxidation of acetaldehyde or butane-naphtha. There is also by-product acetic acid recovered in other hydrocarbon oxidation processes (e.g. xylene oxidation to terephthalic acid and propylene conversion to acrylic acid). More discussion of acetic acid manufacturing and economics is included in Chapter VIII, “Process Technologies and Economics.” The chart below highlights the current global distribution of the 14.4 million metric tons of methanol-consuming acetic acid production capacity (i.e. methanol carbonylation capacity), which represents almost 80 percent of global on-purpose production of acetic acid. It shows that Asia plays the lead role in methanol carbonylation production, and is correspondingly the largest global consumer of methanol for the manufacture of acetic acid.

6,685

910

700

350

2,641

820

10,000

2012 Acetic Acid Capacities by RegionMethanol Carbonylation,-000-metric tons

China Japan Taiwan South Korea Malaysia Singapore

Indonesia Australia New Zealand Other SEA India Other South Asia

Russia Saudi Arabia Iran Qatar Oman Other ME

US Canada Mexico South America Europe Africa

Asia

Europe

Russia

North America

China

Singapore

Taiwan

Trade As highlighted in the”Trade Overview and Matrices” chapter of this study, there is a good percentage of acetic acid that is transported across global borders. In 2012, 2.5 million tons out of the 11.5 million tons of acetic acid produced traded between the regions and countries defined in this study. Much of this trade takes place within Asia, with China becoming one of the major exporters over the past two years. India in turn has become a major importer as their non-carbonylation capacities have become non-competitive. In addition, exports


62

from Singapore, Malaysia, and North America have been noted as well. Chapter VII, “Trade Overview and Matrices,” contains a summary of trade by country and region for the entire forecast period, along with a matrix of acetic acid trade between study countries and regions for the year 2012.


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METHYL TERT-BUTYL ETHER Promoted as an environmentally-friendly gasoline component that could also make up for octane lost by the removal of lead from gasoline, methyl tert-butyl ether (MTBE) has had different geographical fortunes. While now removed from the gasoline pool in North America, the ether finds great acceptance in most of Asia and the Middle East. MTBE, which has relatively strong solubility in water (versus other components of gasoline), was found to have contaminated groundwater, and eventually banned after incidents where it was detected in particularly sensitive areas in the United States. The Middle East, China and other Asian countries have found MTBE to be an efficient means of utilizing refinery streams in recent years, and strong growth has registered in these countries of late. Applications/Markets The primary use for MTBE is to boost gasoline octane value. MTBE also adds oxygen when blended with gasoline, allowing for more efficient combustion, and less carbon monoxide and unburned hydrocarbon in the exhaust emissions. Oxygenated additives like MTBE promote CO2 during combustion as opposed to hazardous CO. MTBE replaces the higher combusting, but more volatile components of gasoline, and is designed to reduce emissions of volatile organic compounds and nitrogen oxides, helping to abate ground level ozone/smog formation. The history of MTBE’s rise and fall in the United States has been chronicled in previous issues of this publication. MTBE can enter groundwater through leaking gasoline tanks and lines, and through improper disposal or dumping of gasoline. MTBE is much more soluble in water (~4% wt/wt) than most other components of gasoline, so its transport by groundwater is much faster than that of the other components. Since then, other oxygenates have replaced MTBE. The two most commonly used are ethanol (mainly in the US) and ETBE (ethanol based, and currently favored in Europe and Japan). In the rest of the world, there has been a less extreme response to the potential for MTBE to contaminate groundwater. Measures in Europe, Australia, Japan, Thailand, and the Philippines have been implemented slowing or restricting the use of MTBE, however, countries in the Middle East and China are registering high rates of growth in MTBE use. MTBE can also be used (“back cracked”) to make isobutylene, mostly for the production of methyl methacrylate. This application has been growing rapidly, with investments in isobutylene extraction increasing, especially in Asia. A refined grade of MTBE is used in the solvents and pharmaceutical industries. The refined grade's fastest growing use is as a commercial extraction solvent and reaction medium. Other uses are as a solvent for radical-free copolymerization of maleic anhydride and an alkyl vinyl ether, and as a solvent for the polymerization of butadiene and isoprene using lithium alkyls as catalyst. One other unique use of MTBE is a medical


64

procedure for the removal of gallstones. This alternative to gallbladder surgery takes advantage of MTBE's capability to quickly dissolve cholesterol. The total non-gasoline, non-isobutlyene uses of MTBE, however, are small and mostly insignificant fractions of total MTBE demand. MTBE Capacity - Overview The pie chart below segments out the total of slightly over 22.4 million metric tons of global available MTBE production capacity in 2012. With the rationalization of much of the United States capacity, China stands out with Saudi Arabia as leaders in global production of MTBE. Some of the facilities in the US have converted to iso-octane production, and others are now export oriented.

China6,627

Russia1,296

Saudi Arabia3,020

Iran620

Qatar600

Other ME560

US2,309

Mexico445

South America823

Europe3,368

2012 MTBE Capacities by Region-000- metric tons

China Japan Taiwan South Korea Malaysia SingaporeIndonesia Australia New Zealand Other SEA India Other South AsiaRussia Saudi Arabia Iran Qatar Oman Other MEUS Canada Mexico South America Europe Africa

Asia

MTBE can be made using available refinery and olefin cracker butylene streams. However, technology employing the use of iso-butane and methanol has become prevalent, especially in the Middle East. More discussion of MTBE manufacturing is included Chapter VIII, “Process and Economics Overview”. With the exception of Malaysia, Asian MTBE capacity is mainly from refinery butylenes. And most of the Japanese capacity registered here is not manufacturing MTBE, with a small amount of MTBE used to make MMA. Trade Exports of MTBE from the US have become regular, mainly to NAFTA partners Mexico and Canada, as well as South America. In Asia, MTBE trade is focused in


65

Singapore as well as in China. Southeast Asia and Middle East (via Singapore) sources have been the predominant suppliers to China for many years. European MTBE supply is increasingly from the Middle East, as some European producers are converting their capacity to ETBE (ethanol replacing methanol in the ether), and demand for MTBE continues without regulatory bans.


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METHYLAMINES Methylamines are tremendously versatile and basic materials which, while not consumed in large quantities, are used in value-added applications. Methyl amines come in three main types: mono-, di-, and trimethylamines. These have one, two, and three methyl groups attached to nitrogen, respectively. Methyl amines are made primarily from a reaction between anhydrous ammonia and methanol (alkylation), with the variants typically made together and separated. Applications/Markets The list at the beginning of this chapter (“Major Methanol Derivative Uses”) provides a good reference for the uses of each type of methylamine. Monomethylamines tend to be further reacted into usable compounds, namely pesticides (methamsodium, methyl isocyanate), solvents (n-methylpyrrolidone), surfactants, explosives, and pharmaceuticals. Dimethylamines (DMA) are used to make solvents (dimethylformamide (DMF), dimethyl-acetamide (DMAC)), water treatment chemicals, surfactants (fatty tertiary amines), and many others. DMF has seen rapid growth recently as a solvent for the manufacture of synthetic leather, pharmaceuticals, and electronic materials. China is the largest consumer of DMF, using roughly 60% or more of the world’s supply of DMA for the manufacture of synthetic leather items such as shoes, belts, and briefcases. DMF is also used as a solvent for polyacrylic fibers, which can be used in swiftly growing superabsorbent applications. In the past 5 years, China’s DMA consumption has been rising notably. Trimethylamines are predominantly used for the manufacture of choline chloride, which is used as an animal feed additive. Total methylamine demand globally in 2012 was 1.03 million metric tons, with the majority for dimethylamines, and the balance almost split between mono-, and trimethylamines as well as specialty methylamines. Growth in this market is expected to be slightly above global GDP growth rates, with many applications benefiting from growth in developing countries, in applications like grain storage pesticides (replacing methyl bromide – an ozone depleter - with methamsodium). Methylamine Capacity – Overview In 2012, the global capacity to produce mixed methylamines summed to 1.6 million metric tons. North America still holds the majority of capacity, followed by West Europe and China. Taminco has consolidated Air Products, DuPont, Arkema methylamines capacities in Europe and North America, and is now the largest producer globally. Most investment in new production capacities is expected outside of Americas, although BASF has recently constructed another facility in Geismar,


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Louisiana. Given methanol and ammonia as feedstocks, the Middle East, China, and South America are ideal locales for methylamines production. In particular, one facility in Saudi Arabia commenced operations in 2010, adding 50 thousand metric tons of mixed methylamine capacity, particularly targeted for the DMF production.

China537

India43

Russia50Saudi Arabia

50

USA499

Canada27

Mexico35

South America10

Europe230

Africa40

2012 Mixed Methylamines Capacities by Region-000- metric tons

China

Total Capacity: 1,632

Trade There is only small scale global trade for methylamines, with only about 3% of mixed methylamines produced globally traded between the countries and/or regions. In the Asian region, India remains the major importer as the capacity build up in this country was rather slow, whereas Japan is a significant exporter.


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METHYL METHACRYLATE (MMA) Methyl methacrylate (MMA) is the commercially prominent member of the chemical family of methacrylic esters, which are typically monomers used in the polymerization to acrylic plastics. Methacrylate polymers are prized for their clarity, colorability, color compatibility, weatherability, and ultraviolet light stability, which allow them to be used for both indoor and outdoor applications. These plastics are generally mature in their development, but continue to find unique applications which support their growth. Applications/Markets MMA is highly versatile, and most typically polymerized into polymethyl-methacrylate (PMMA) or co-polymerized with other monomers. PMMA is a vinyl polymer, made by free radical vinyl polymerization from MMA. PMMA is more impact resistant and more transparent than natural glass, and finds uses as a shatterproof replacement for glass (e.g. for ice hockey rinks), as well as for thick clear barriers where glass is not transparent enough (especially aquarium tanks). A relatively new and swiftly growing use of PMMA is in the manufacture of optically clear flat screen computer displays. Molded and extruded products of PMMA resins can be used in products that require good optical clarity and stability such as car tail lights and outdoor lighting. PMMA is sold commercially under the trade names Plexiglas and Lucite, among others. PMMA sheets are also referred to as “organic” glass, and can be cast, molded, or extruded into useful items. PMMA is also found in paint. Acrylic "latex" paints often contain PMMA suspended in water (which requires another methanol derivative, poly vinyl acetate). MMA derivatives also find large use as impact modifiers (alone and with butadiene and styrene in a terpolymer arrangement) for clear, rigid polyvinyl chloride (PVC) resins, which are in turn used in vinyl siding in home construction. MMA use, which had generally been driven by the automotive and construction industries, is now more driven by growth in the electronic industry. In 2012, with moderated MMA demand into optical applications, MMA growth has moderated after high growth in previous years. The outlook for growth is covered in subsequent sections of this analysis. Other MMA uses include acrylic fiber, acrylic emulsions, ion exchange resin, paper glazing agent, printing and dyeing assistants for textiles, leather processing agents, lubricant additives, pour point reducers for crude oil, and the production of infiltrating agent for wood and cork wood, impregnating agent for generator coil, insulate priming materials, plasticizer for plastic-type emulsions (plastisols), among others. New commercial applications include plastisol ink replacement (without PVC or phthalates).


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MMA Capacity - Overview Total global nameplate MMA production capacity for 2012 was 4.3 million metric tons. The majority of this capacity is located in Asia, with the balance split mostly between the United States and Europe.

China626

Japan560

Taiwan194

South Korea320

Singapore343

Other SEA250

Russia50

US1,080

South America50

Europe834

Africa

2,308

2012 Methyl Methacrylate Capacities by Region-000- metric tons

China Japan Taiwan South Korea Malaysia SingaporeIndonesia Australia New Zealand Other SEA India Other South AsiaRussia Saudi Arabia Iran Qatar Oman Other MEUS Canada Mexico South America Europe Africa

Asia

MMA consumes methanol via a variety of different production technologies, with the predominant commercial method utilizing the acetone cyanohydrin (C3) process, developed in 1937 by ICI. Other, more competitive processes have been developed with isobutylene and ethylene, although as each process consumes methanol in roughly the same amounts per ton of finished product, changes in MMA process technology do not pose a threat to the amount of methanol consumption. Notably, there is currently no MMA capacity in the Middle East, due mostly to the lack of feedstock (particularly propylene and butylenes), as well as the lack of local consuming industry for MMA and PMMA. However, this can be expected to change as the ethylene-based MMA plant in Saudi Arabia is expected to begin commercial operation by early 2016. Trade

MMA trade is currently characterized by imports into China, Korea, Taiwan (typically for LCD and other optical application) as well as a number of SEA countries (including Malaysia, typically for cast sheet applications). The chart on the next page depicts Japan and Singapore as the major exporters (Thailand can be expected to export more after the commissioning of two new MMA plants). China is


71

a dominant MMA importer. The US is a net exporter of MMA. PMMA and other MMA derivatives that are also traded in large quantities, typically as part of prefabricated parts made in developed countries. The “Trade Overview and Matrices” chapter of this study contains a summary of trade by country and region for the entire forecast period, along with a matrix of MMA trade between study countries and regions for the year 2012.

-250

-200

-150

-100

-50

0

50

100

150

200

250

2008 2009 2010 2011 2012

MMA Net Trade, Asia (2008 - 2012)-000- metric tons

China Japan Taiwan South Korea Malaysia Singapore Indonesia Other SEA


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ALTERNATIVE FUELS, METHANOL TO OLEFINS, FUEL CELLS Introduction The following table lists the developing markets for methanol under this category of “derivative,” the current use of methanol in these applications, and their future potential (which does not imply that the potential will be reached).

ApplicationCurrent Methanol

Demand (2013E, -000- Tons)

Potential* Methanol Demand

(-000- Tons)Alternative Fuels Gasoline Blending & Combustion 9224 40,000 - 50,000 Biodiesel 1218 25,000 - 40,000 Dimethyl Ether (DME) 4734 10,000 - 15,000 Power Generation & Others < 1 40,000 - 60,000

Fuel Cells 7 3,000 - 8,000

Methanol-to-Olefins 5886** 30,000 - 40,000

Methanol-to-Gasoline 200*** 15,000 - 35,000

Developing Methanol Markets Summary

* Rough estimates of peak demand calculated as replacement percentage of existing global demand as a substitute** Five commercial-scale MTO plants are operating in China as of April 2013. Several projects are still in the pipeline*** ExxonMobil MTG plant in China commissioned in 2009

Looking at the table, the upside for methanol demand is enormous – a rough potential of 163 to 248 million metric tons of methanol requirements, or at least 3 times current market size, is shown. The current demand for each of these applications is relatively small relative to potential demand. This is due, in good part to developmental hurdles, but also to the relatively high historic price of methanol relative to conventional fuels. However, over the past few years, methanol has become more competitive economically, and has made significant inroads towards substitution of traditional refined products, with almost 22 million metric tons of methanol now used in these applications. The chart on the next page compares the historical prices of methanol in USD per million British Thermal Units (mmBTU) to those of conventional liquid fuel bases (fuel oil and naphtha), emphasizing the recent (especially after early-2008 onwards) cost effectivenss of methanol versus these refined products.


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0

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n-96

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2Fe

b-13

US$/

MM

Btu

Methanol vs. No. 2 Fuel Oil, Naphtha$/MMBtu

MeOH - USG Contract No. 2 Fuel Oil Naphtha C&F Japan Historically, it should be clear that methanol has experienced short periods where it was competitive with energy. Through 2007, it had not been able to stay so for prolonged periods of time. This was related to the vast pull that energy markets can place on methanol; a small substitutional demand for energy markets can overwhelm the methanol supply in a short period of time, and when events conspire to tighten the balance so quickly (as in August of 2007 when supply reductions from Chile were first felt), prices for methanol can quickly price themselves out of some commodity energy uses. Over the last few years, as crude oil prices run the costs of refined goods to unprecedented levels, and supply of methanol has improved, the driving force for the development of energy uses for methanol became much stronger. In fact, throughout 2008 - 2012, conditions have been such that methanol affordability into gasoline and DME in China was positive. These uses are covered in more detail in Chapter V, “Regional Market Analysis.” The next sections will provide more detail on the six avenues for methanol to enter the energy pool, describing the processes in greater detail, and providing an update on historical and current activities in each area. Certainly, all of these developing applications are receiving a boost from the current crude and refined energy products pricing environment; on an energy basis (USD/BTU), methanol has not appreciated to the same extent as crude based products. Eventually, significant development of these markets will have to come from efficiencies in these methanol-based processes relative to existing processes under normal conditions. This will require significant capital and resource outlay, and will also require a long term


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strategic mindset. Certainly in China, the value of methanol as a fuel is enhanced by the fact that methanol enables the use of domestically sourced coal to provide energy security, replacing refined products which require import of foreign crude oil. Gasoline blending Methanol combusts readily, and for that reason alone has been considered as a possible fuel for direct combustion in a variety of engines, including automotive transport. The case for methanol (or blends of methanol with gasoline) includes the following supporting characteristics: • Economy: methanol prices can be well below that of gasoline on an energy

equivalent basis, particularly when crude oil prices are high compared to history. • Energy self-sufficiency: methanol is a viable way to reduce gasoline/crude oil

use. It can be manufactured from a variety of carbon-based feedstocks such as natural gas, coal, and biomass (e.g., wood) in an efficient process, and the use of methanol would help reduce dependence on imported petroleum in significantly crude deficient countries (e.g. United States, China, and Japan, Germany, France). It is the easiest liquid fuel to reform to hydrogen.

• Fuel Quality and Performance: Methanol has a very high hydrogen-to-carbon ratio (CH3OH), and has a higher octane value than gasoline. Its combustion requires less O2 than gasoline, requiring lower compression power, yielding less NOx/km traveled. Methanol also yields lower CO, CH, butadiene, benzene emissions than gasoline per distance traveled, and has no sulfur emissions.

• Environmental benefits: Methanol in theory has slightly improved GHG emissions vs. gasoline [using meOH made from natural gas, and coal (with carbon capture technology)

• Safety (relative to gasoline): methanol does not evaporate or form vapor as readily as gasoline does, and methanol vapor must be four times more concentrated in air than gasoline vapor for ignition to occur. In addition, gasoline vapor is two to five times denser than air, so it tends to travel along the ground to ignition sources. Methanol vapor is only slightly denser than air and disperses more rapidly to non-combustible concentrations. Finally, methanol burns 25 percent as fast as gasoline and methanol fires release heat at only one eighth the rate of gasoline fires. These properties together make methanol inherently more difficult to ignite than gasoline and less likely to cause deadly or damaging fires if it does ignite.

On the other hand, other factors have kept broad use of methanol from occurring: • Energy density: methanol’s energy content on a per-gallon basis is roughly half

that of gasoline. In pure form, motorists would need about twice as much methanol as gasoline to travel an equivalent number of miles, and nearly twice as much methanol would have to move through the fuel distribution system to accommodate them.

• Economics: as shown previously, methanol costs on a USD/MMBtu basis have


76

been consistently higher than gasoline or naphtha. • Engine modifications: the same factors promoting safety of methanol work to its

detriment in a standard combustion engine; i.e. the different combustion rate means that engines can require modification to accommodate the differing combustion properties of methanol, requiring investment by automotive companies, and the support of consumers/end users.

• Fuel Characteristics: Methanol has a higher vapor pressure than gasoline and requires special additives to reduce corrosion and increase lubricity. It also yields higher aldehyde emissions per distance traveled.

• Solvency characteristics: Studies by some auto manufacturers suggest that up to 12 components of their vehicles would have to be modified to accommodate for pure (or “straight”) methanol, which is an oxygen containing hydrocarbon and thus able to dissolve some materials used in conventional gasoline driven autos (rubbers, plastics, plasticizers, etc.). Yet other parties claim that blends of methanol with gasoline in lower amounts, using appropriate co-solvents and additives, will minimize this need. Such parties’ claims are to be taken with caution; as of today, only marginal evidence supporting such claims has been provided.

• Methanol produces a high amount of formaldehyde in emissions, which can serve as a poison for exhaust conversion catalysts.

• Environmental: Methanol made from coal yields significantly poorer GHG emissions vs. gasoline when carbon capture and storage technology is not employed.

In practice, rather than straight use, methanol has been mostly blended with gasoline, which enables the use of existing supply infrastructure, and removes some of the negative aspects of methanol combustion mentioned above. In the United States, despite an organized effort between government and the automobile engine manufacturers in the late 1980s/early 1990s, whereby systems which could consume gasoline and methanol at variable ratios were employed, commercialization of methanol as an automotive fuel largely failed. Much of the failure surrounded the economics, although need to have specialized storage for a small volume material, and the lack of incentive for the suppliers to provide such infrastructure. European use of methanol in gasoline also contributed. However, in resource-scouring China, there is a significant effort to develop methanol/gasoline blends (with details provided in Chapter V, “Regional Market Analysis”). These efforts have met with a good deal of success in some provinces, spearheaded by Shanxi province, and “unofficial” use in most of the other provinces within this country. The government of China has rolled out specifications for methanol fuel (M100) and higher alcohol-gasoline blends (M85 – containing 85 percent of methanol) in 2009. Through 2012, the Ministry of Industry and Information Technology of China (MIIT) pilot projects for methanol-powered cars in Shaanxi province, Shanxi province and Shanghai municipality have had a significant impact on the sophistication and volume of use of methanol as a gasoline blend component. These projects include a Shaanxi provice trial of M25 fuels at select retail


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outlets. On the other hand, nationwide-level commercial progress is slower than hoped for. A specification for M15 (15 percent methanol in the blend) has been delayed without any definite timeline for implementation. As of March 2013, speculation persists about the timing of the standard, with no official position stated. The future use of methanol in gasoline will be driven by economic considerations; if methanol prices, on a contained energy per unit ton basis are consistently competitive with gasoline, as currently the case, it can be expected that methanol will continue to find uses in this application. In fact, several provinces in China have been actively promoting this application. Please refer to the China portion of Chapter V for details on future expectations. Dimethyl Ether (DME) DME is a multipurpose chemical gas, generally made from methanol. DME is an aerosol propellant, and has developing markets as a fuel. Because of similarities in physical properties, DME has found much larger markets as a replacement (in mixtures with) liquefied propane gas (LPG) & kerosene for home heating and cooking uses. It is also able to substitute diesel for transportation needs, and can further be used in power generation.

2 CH3O H CH3O CH3 + H2O

Methanol DMEcatalyst

2 CH3O H CH3O CH3 + H2O

Methanol DMEcatalyst

As the diagram below exhibits, two molecules of methanol are used to produce one of DME in a dehydration reaction (which gives off water): DME methanol-based process technology is readily available from several licensors, and offers little challenge, with the possible exception of catalyst preparation. Alternate technology exists which combines DME and methanol synthesis steps to get DME directly from synthesis gas (needs high CO/H2 ratio). This technology has been scaled up, although will consider slightly different reactor design which might limit its scale in the near term. Essentially all DME manufactured today implements the methanol dehydration technology. Several advantages of using DME in the applications described above exist. For one, DME is considered an ozone-friendly “clean fuel,” having replaced CFCs in propellant applications. It is non-toxic and possesses environmental benefits over traditional fuels, such as lower particulate and smoke emissions, minimal NOx emissions, and no SOx emissions. With vapor pressure similar to most


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propane/butane (the components of LPG) mixtures, existing shipping, storage, and packaging (bottles, tanks) networks and infrastructure can mostly be used. On the other hand, challenges to DME development exist. Due to different solvency differences with LPG, rubber hosing and some other elements of infrastructure require replacement (these are not considered major items). More of concern is the slightly lower energy density (energy per unit volume) of DME relative to many LPG varieties; while this is likely less of a requirement for small volume users, power generation facilities will either have to suffer some loss in productivity, or develop means to increase throughput. Also, since the physical density (weight per unit volume) of DME is typically more than LPG, filling existing containers with the same volume increase weight and could have some effects on shipping and transport. In the area of DME use in diesel engines, some modification necessary for use in diesel cars, and there is generally a lack of market/infrastructure for DME use as auto fuel. DME can be made from natural gas or coal via methanol, and the economics of these processes are currently favored versus LPG, naphtha, fuel oil, and LNG (see Process Economics section of this study). Even with other variable, fixed, and financing costs, given the high level of today’s energy markets, a substantial economic opportunity for DME is being pursued in China. DME pricing, despite DME’s approximately 20 percent less energy per unit volume versus typical LPG, has become closer to this energy density difference as the market has matured. LPG blending is the primary and most quickly growing market for DME. Transportation fuel and power generation markets remain largely developmental. In July 2006, the National Development and Research Committee (NDRC) of China issued a “DME policy” that favored the use of DME and opened up national legislation and specifications for its use. This resulted in a slew of new projects (see China section of “Regional Market Analysis” for details). Developmental activity is apparent in Egypt, Japan, India, Indonesia, Korea, the United States, and Sweden. In 2009 and 2010, some signs of concern were posted for DME use in China, where regulatory agencies are trying to crack down on the use blends of DME and LPG which are too rich in DME content, and pose a threat to safety in bottles which have not been modified to handle the solvency differences which the DME molecule can pose to seals, gaskets, and hosing. The Standardization Administration of China (SAC) has published a national standard for DME for urban gas use (GB25035-2010) effective from July of 2011. Notably, this standard is only applicable for DME content 99%w or higher ( “pure DME”). Application of this type of gas requires special construction of the container and stove (and/or a significant upgrade from existing LPG-based equipment). As such, this standard will not quickly revolutionize existing DME usage in this country, and the attractiveness of DME still lies on the ability to blend the DME with LPG and still be able to use existing LPG infrastructure.


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In early ‘12, media coverage in China negatively highlighted illegal and excessive blending of LPG and DME. The television network presented a series of investigative articles and clips in conjunction with the nation’s annual consumer-rights day on March 15 that revealed these unfair practices. For the LPG-DME blending investigation, two specific DME plants were mentioned in the program, although the overall focus seems to be more specifically targeted at unscrupulous LPG-DME blenders and cylinder fillers, often involving relatively small and unsophisticated operations. Specifically, the program highlighted the potential incompatibility of the rubber gaskets currently used in LPG tanks and the resulting safety issues from possible leakage. This type of surprise check is not the first one occurring in the last few years and the rules and regulations for this application are yet to be fully defined in some areas. On a more positive side, there have been some signs that provincial governments are stepping up to fill the gap in regulatory availability. Capacity to produce DME is almost exclusive to China, and has grown significantly in the past few years, with almost 8.5 million tons of available production capacity in 2012 in that country. The rate of capacity addition in China has been spectacular, but the rate of addition will slow down markedly in the near future. Due to the large amount of methanol required to manufacture DME, this application has had a major impact on the demand of methanol in a short period of time and has become a major influence on pricing. A detailed list of DME capacities and their start up timing is provided in the appendices of the study. Biodiesel Biodiesel is the product of a vegetable oil or animal fat that is chemically reacted with an alcohol to produce a new compound that is known as a fatty acid alkyl ester. The definition has been expanded to include other oils as well as other related processes (eg. New biodiesel plant belonging to Neste entails direct hydrogenation of plant oil or animal fat triglycerides). The discussion in this chapter will be limited to the “transesterification” reaction as will be explained below, which still produces the most common biodiesel globally, and is the process that consumes methanol. Chemically, biodiesel is defined as the mono-alkyl esters of fatty acids derived from vegetable oils or animal fats. The concept of using vegetable oil as a fuel dates back to 1895 when Dr. Rudolf Diesel developed the first diesel engine to run on vegetable oil. Diesel demonstrated his engine at the World Exhibition in Paris in 1900 using peanut oil as fuel. Methanol’s role in the production of biodiesel (methyl ester) is depicted on the next page. Typically, triglyceride contained in vegetable oil is chemically combined with methanol in a “transesterification” reaction, producing the methyl ester and glycerol. A catalyst such as sodium or potassium hydroxide is required. These are typically introduced in a slurry of methanol and catalyst. Some technologies include the use of sodium ethoxylate slurries. The approximate proportions of the reaction are:


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C O H

C O H

C O H

H2 H H2+ 3 CH3O H +

C O C=O R1

C O C=O R3

C O C=O R2

H2 H H2

CH3 O C Rx

=O

3catalyst

Triglyceride Alcohol Methyl Ester Glycerol

Methanol (can also be ethanol)

C O H

C O H

C O H

H2 H H2C O H

C O H

C O H

C O H

C O H

C O H

H2 H H2+ 3 CH3O H +

C O C=O R1

C O C=O R3

C O C=O R2

H2 H H2C O C=O R1

C O C=O R3

C O C=O R2

H2 H H2

CH3 O C Rx

=O

3 CH3 O C Rx

=O

3catalyst

Triglyceride Alcohol Methyl Ester Glycerol

Methanol (can also be ethanol) 100 lbs of oil + 10 lbs of methanol yields 100 lbs of biodiesel + 10 lbs of glycerol Biodiesel, or alkyl esters, can be produced at high conversion using standard equipment at low temperatures (150F) and pressures (20 psi). The methanol is charged in excess to assist in quick conversion and recovered for reuse. Many different vegetable oils are used in the production of biodiesel globally, generally related to their abundance. In the United States, soybean oil is the most popular (biodiesel from soybeans is sometimes called soydiesel, methyl soyate, or soy methyl esters (SME)). In Asia, palm oil is the feedstock of choice (to make palm methyl ester (PME)) as Malaysia and Indonesia are the largest producers of palm oil in the world. Elsewhere in Southeast Asia, and particularly in India, jatropha oil is gaining increased popularity due to its competitive cost and relatively quick and sustained growth. In Europe, rapeseed oil leads the biodiesel feedstock types. Coconut oil is also considered globally. In addition, waste vegetable oils (i.e. from cooking) and animal fats (from butcheries and other animal processing facilities), along with a host of other “distressed” oil streams have been used. Notably, different feedstocks will produce biodiesel of differing compositions and properties, and strict use of ASTM and EN specifications are being used to classify various grades of biodiesel. For the alcohol, methanol is currently the most competitive cost wise, and is getting the lion’s share of attention. Ethanol is also being used directly in fuels, and has generally been priced much higher than methanol, with no inherent advantage as the alcohol in the biodiesel process. There are several advantages in using biodiesel as a diesel substitute. For one, as a fuel containing “renewable” components, many oil-dependent governments see an opportunity to leverage available arable land (not to mention support the farming community). Generally, as an agricultural product, net carbon dioxide emissions are considered positive, although these studies are not definitive and overall CO2 reduction is likely a function of the feedstock employed. Also, methyl esters generally blend into diesel with no modification to auto engines or infrastructure required. Additionally, particulate emissions, especially the black soot portion of diesel emissions, are greatly reduced with biodiesel. Finally, biodiesel, even in low


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blended levels, can improve the lubrication characteristics of fuels like ultra-low-sulfur diesel. However, not all is rosy with biodiesel: many emissions tests have shown a slight increase in oxides of nitrogen (NOx) emissions relative to diesel. NOx is a major contributor to ground-level ozone, which is heavily scrutinized as it contributes to smog and haze. There is still quite a large amount of debate on the accuracy of the testing which led to this conclusion, and biodiesel lobbyists in the US (Texas in particular) are waging a battle to discredit these studies. Palm oil is generally considered to increase NOx emissions, whereas rapeseed is generally considered to lower or at a minimum not effect NOx emissions. Note that any increase in NOx can be eliminated with an adjustment to the engine's injection timing. Finally, with some grades of biodiesel, cold weather characteristics of biodiesel are a concern – especially for overseas shipment and engine operability. At the same time, there have been some debates about the environmental benefits of biodiesel. Quoting one example, pressure on palm-based biodiesel exports have intensified after the US Environmental Protection Agency declared palm oil based biodiesel unfit for the US renewable fuel program. In late January 2012, the EPA claimed that palm oil based biodiesel replaces petroleum diesel fuel, it only reduces emissions by 17 percent, lower than the agency’s 20 percent minimum. The largest roadblock in the future development of biodiesel relates to costs of production. These costs must eventually be supported by consumers. MMSA has developed an economic model of biodiesel production cost, and has used it to compare historical costs of biodiesel production versus conventional diesel. These costs include feedstock costs, co-product credits (for glycerin) as well as catalyst and other variable and fixed costs. In summary, increases in palm oil prices (together with other soft grain prices) have conspired to make palm methyl ester much less competitive with diesel. As a result, biodiesel producers very often need some combination of mandates and or subsidies in order to be competitive. The situation is largely similar for soy and rapeseed, especially as these feedstocks typically have higher costs than palm oil. Historical and forecast use of methanol in biodiesel by region is shown in the chart next page. The chart shows some recent growth for meOH use in biodiesel, but the economic challenges have slowed investment as well as the pace of new start ups. Many biodiesel facilities globally are running at very low operating rates. Europe currently has the largest and most developed biodiesel market. Industrial scale production started in the early 1990s amidst favorable incentives from selected governments, although these incentives have been largely cut back as the industry has grown. The second and third largest biodiesel market is the Asia and USA (and the rest of North America countries).


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0

200

400

600

800

1,000

1,200

1,400

2008 2009 2010 2011 2012

Methanol Demand for Biodiesel Production by Region-000 metric tons

Europe North America South America Asia

Methanol-to-Olefins (MTO) In the mid 1990s, UOP and Norsk Hydro introduced technology enabling the conversion of methanol to ethylene and propylene mixtures (among other higher carbon containing by products). In the process, methanol is converted to DME, then to hydrocarbons, which are converted to plastics, and a large amount of water. At the moment, catalyst and reaction mechanism are active areas of research and development. Ethylene and propylene (olefins) are major feedstocks for plastics known as polyolefins (polyethylene and polypropylene), and current projects are essentially methanol (or natural gas and coal) to polyolefins designs. MTO is enabled by the use of proprietary, specially designed catalysts and reactor systems. Most olefins are made by “cracking” higher carbon containing hydrocarbons like ethane, ethane/propane mixes, LPG, naphtha, and other heavy feedstocks. In 2010, three commercial scale MTO operations were completed in China, with more projects forthcoming. There are several factors supporting MTO processes: • Propylene demand is growing faster than ethylene demand. Conventional

technology used in olefins processes (steam cracking to make ethylene and propylene, among others) fails to generate enough propylene to meet market growth, whereas MTO technology can generate more propylene than ethylene (with some licensor offering “methanol-to-propylene” technology with only little by product of ethylene). Some processes also recycle heavier co-products, and


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offer “variable” propylene to ethylene ratios, allowing adjustment to market conditions.

• Abundant, low priced natural gas (and to a certain degree, coal) exists in many parts of the world, and as methanol producers have demonstrated, can be priced more stably (with less volatility) than ethane, E/P mixes, LPG, naphtha and/or other feedstocks for olefins production.

• Methanol production scale in “mega” facilities (exceeding 1.9 million metric tons per year, or more) is no longer speculative, which enables the construction of world scale ethylene and propylene derivative units, enhancing competitiveness of operations.

• Flexibility in the design of the supply chain from natural gas / coal to polyolefins is possible, as methanol as a feedstock could be made remotely, then shipped to an MTO facility which is located near consuming markets (feasible in existing olefins crackers only with naphtha or heavy liquids, which of course are not made “on purpose,” rather they are byproducts of a different investment in gasoline manufacturing).

Yet many hurdles exist for the large scale commercial development of MTO: • While individual process “technology risk” is likely low, the aggregate risk is

compounded, as at least four major different technologies (two extremely new) must be incorporated.

• Current economics suggest that affordable natural gas and coal will be required for long term commercial success of an MTO facility. “Affordable” is defined as cost-competitive versus alternate olefins feedstocks, and this is not the case in all regions of the globe, particularly in the United States, where gas-based olefins production remains highly comptetitive thanks to abundant natural gas.

• The high amount of capital involved dampens enthusiasm from project financiers, and likely funding will continue to come from “balance sheet” financing of a strategic investor.

One interesting feature of the process is the large amount of water produced. This could be either an advantage or disadvantage, depending upon location of the facility. In fact, this issue was one of the most important factors delaying commissioning of the existing MTO plants in China. The three integrated commercial MTO plants in China have similar configurations on the front end. The design consists of 1.65 - 1.8 million metric ton per year methanol facilities feeding 500 - 600 ktpa metric ton MTO or MTP processes, with downstream polyolefin facilities. Another type of design calls for a 2.9 million metric ton per year methanol facility to feed a 1.1 million metric ton MTO (and associated C4+ conversion) process, which in turn would supply a 450,000 metric ton per year polyethylene facility, and twin 325,000 metric ton per year polypropylene facilities. Such a facility would cost nearly US$2 billion according to technology sponsor estimates.


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Another recent trend is the emergence of non-integrated MTO facilities, with methanol feedstock being procured from other producers. Savings in CAPEX, lower operational costs and proximity to the end users are the most important drivers behind this phenomenon. Two non-integrated MTO facilities have begun operation in China, with several other plants scheduled to be restarted in the study forecast. More discussion has been provided in the China section of Chapter V, “Regional Market Analysis.” MMSA has modeled two facilities of similar olefins production capability, and developed a “cash cost” (raw material less co-product value plus variable and fixed costs) time series for methanol-based olefins versus naphtha-based olefins for a hypothetical Asian producer. The chart below shows the results of modeling.

The graph above quantifies the MTO advantage for a hypothetical operation yielding 1.2 tonnes of propylene per tonne of ethylene on the coast of China versus a hypothetical naphtha cracker in the same location on a monthly comparative basis over the past 13 plus years. The MTO operation purchases methanol at market prices, whereas the conventional cracker purchases naphtha. Each then sells olefins, crude C4s, pygas, and cracker co-products as applicable to downstream processors (using yields issued by technology providers). The green bars show the cash cost to produce ethylene from a hypothetical MTO facility in coastal China, while the red bars represent cost per ton of ethylene from a “typical” Asian naphtha cracker. The blue line is the difference between the two cash costs, with negative values signifying advantageous economics for the MTO process.


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The chart implies that from the perspective of a methanol manufacturer, since the middle of July 2005, for all but the times when meOH prices flared up, the price that methanol could fetch to make olefins was more attractive than the market price for methanol. The red line shows the market price of methanol. The blue line is the price that methanol needs to be at to make ethylene from MTO equal in cost to naphtha based ethylene (i.e. this price is a reasonable way to define “affordability” of methanol into MTO – naphtha crackers will be around for a long time and will have a major say in China/Asia over the next 30+ years). As of late, an upward trajectory for cracker products and co-products pricing has held, including ethylene and propylene. Nevertheless, naphtha pricing has been increasing at a faster rate, putting naphtha-based ethylene producers at a disadvantage relative to meOH-based ethylene producers purchasing meOH merchantly. In contrast, methanol pricing has been relatively flat to slightly negative during the same period of time. As mentioned, an upward trajectory for products and co-products pricing has been apparent over the last few years, including ethylene and propylene as shown in the graph below. Unfortunately for naphtha-based ethylene producers, the feedstock naphtha pricing has been increasing at essentially the same magnitude. On the other hand, methanol pricing has been relatively flat in the same period of time. This is the same behavior can reasonably be expected in the coming years. More discussion of these can be found in Chapter V., “Regional Market Analysis.”


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Interest in MTO technology also lies on its ability to tailor the propylene yield, especially as propylene prices have been fetching higher prices compare to ethylene over the last few years. To elaborate, sensitivity analysis - a technique used to determine how different values of an independent variable (prices of co-products and feedstock) will impact a particular dependent variable (ethylene cash cost) – can be employed. In short, and as seen in the previous graph, due to relatively narrow co-product distributions in the MTO process (especially compared to naphtha crackers), the cash cost to produce ethylene in this method is sensitive to two particular variables – feedstock and propylene pricing.


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-10% -8% -6% -4% -2% 0% 2% 4% 6% 8% 10%

Ethylene Cash Cost - USD/MT

Percent Error in Estimate

Sensitivity Analysis - Ethylene Cash Cost via MTO Hypothetical Asia, 1.75 tonnes propylene/tonne ethylene

(example from recent data)

Methanol Price C3 Price C4 Price

Fuel Gases Fixed Cost Variable Cost Additional analysis shows that coal producers show a positive margin from coal to olefins, which supports the large MTO facilities and projects in China, largely sponsored by coal companies. Additionally, with the proper coal pricing, these returns are large enough to provide adequate returns and generate long term economic viability. These matters lie outside of the scope of this study, but they represent a topic which MMSA is glad to discuss separately. Direct Methanol Fuel Cells (DMFC) Fuel cell proponents tout the very real possible benefits of these devices, which create direct current (DC) voltage through an electrochemical reaction that requires hydrogen and oxygen, yielding water and electricity. These benefits include low toxic emissions, better efficiency, quick installation, quiet operation, and eliminating the need for long transmission lines. Recently developed devices offer the advantages of cordless and replaceable packs of methanol, which last longer than similarly sized and much heavier lithium batteries. Yet the technology is high in cost, and has yet to be consumed on significant commercial scales. Given methanol’s toxicity, and the need for safe containers, significant regulation development must take place in order to develop the use of newly designed devices. And in automotive applications, considerable high cost product development must occur. There are many types of fuel cells, although the proton exchange membrane (PEM) fuel cell is being touted as one which can power vehicles, homes, and other devices.


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In the PEM fuel cell, oxygen and hydrogen are forced into the fuel cell, distributed over the surface of a membrane that is coated with a catalyst, typically platinum. On this membrane, a “reverse electrolysis” reaction occurs, with positively charged protons being sieved selectively on one side of the membrane (cathode), after the catalyzed removal of electrons from hydrogen. Protons react with oxygen to form water and yield electrical energy. One major hurdle in fuel cell development is sourcing hydrogen. Hydrogen can come from the reformation of natural gas or other hydrocarbons, but this requires significant energy, produces carbon dioxide and carbon monoxide, and typically results in hydrogen contaminated with carbon monoxide, even in the purest forms of hydrogen from this source. Carbon monoxide competes with hydrogen for absorption on the membrane surface, and soon renders the membrane useless. While significant efforts are being pursued to overcome these difficulties, the solutions are complex, and will have to be able to survive real-world performance criteria (i.e. temperature extremes, variable loading) which occur with automobiles. Methanol can be converted to hydrogen via steam reforming, and commercially available processes exist, including one provided by Mitsubishi Gas Chemical. Hydrogen purity from this process is unknown. In recent years, the “direct methanol fuel cell” (DMFC), which uses methanol directly, has shown the most immediate potential for commercialization. In the DMFC, methanol is essentially a hydrogen carrier, and is converted into carbon dioxide and water, producing electricity.

Methanol

WaterH+

e-

CO2 Anode Cathode

O2 (from air)

Water(recoverable)

Membrane

Overall Reaction: CH3OH + 3/2 O2 CO2 + 2H2O

MethanolMethanol

WaterH+

e-

CO2 Anode Cathode

O2 (from air)

Water(recoverable)

Membrane

Overall Reaction: CH3OH + 3/2 O2 CO2 + 2H2O Regardless of fuel cell type, a “wheel to wheel” assessment of the fuel cells in automotive applications suggests that this application could take a decade or so to develop (it has been worked on for at least 8 years). For one, they are not much more efficient than combustion engines. And, non-renewable fossil fuels are still


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consumed in the manufacturing of the cells themselves. The most feasible markets are those where convenience will enable the higher economic cost of the fuel cells (i.e. consumers will overlook these costs). One good example is “portable power”: battery replacement (for laptops, cellphones, personal digital assistants, portable music devices, and more, where methanol has already had success via Toshiba’s DMFC process), recreational vehicle power, temporary and emergency power generation (such as highway signs and weather stations), and military uses (including remote communication and power generation). Direct Combustion/Power Generation One of the popular uses of direct combustion application in China is for commercial cooking in restaurant and hotels. It is reasonable to expect that the absolute amount for each eating establishment is small. However, as the number of users is large, and aggregate demand is sizeable. Another type of direct combustion of methanol is for power generation purpose, which could be the largest of developing methanol markets. As far back as 1985, successful tests of methanol in gas turbines have been conducted, when General Electric completed a demonstration program in 1985 for the then Celanese Chemical Company testing the use of methanol in gas turbines. GE heavy-duty gas turbines were used, without requiring major modification to the combustor. NOx emissions using methanol were 20% that of distillate and since sulphur is not present in methanol, SOx generation does not occur. Since then, other advantages of using methanol for power generation have been identified. For instance, gas turbines frequently inject water or steam into the combustor to suppress NOx emissions. Since methanol is miscible in water, it can be premixed with water prior to injection to the combustor, reducing water demand by 25%. Also, methanol may be suitable for dual fuel operation, either as methanol/natural gas or methanol/diesel blends. Dual fuel operation could provide emission reductions, as well as reduced capital costs and improved plant start-up. In February 2001, General Electric issued a favorable report on the use of methanol as a gas turbine fuel, calling it “superior turbine fuel, with the promise of low emissions, excellent heat rate, and high power output.” Now, GE, Siemens Westinghouse provide commercial offerings of Methanol /DME fired E class and F class gas turbines. GE, and SW guarantee power output, heat rate and performance. Somewhat amazingly, despite all these positives for methanol as a combustion fuel, there has been almost uniform reluctance to use it to generate power. Like DME versus LPG for power generation, methanol has lower energy density (volume basis), and therefore storage and throughput would have to be modified were it the feedstock instead of LNG or other hydrocarbons. Additionally, energy security concerns and the lack of large scale commercial precedents cause hesitation. But


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perhaps the largest reason goes back to the relatively volatile price of methanol versus other potential fuels (see previous chart in this section comparing historical USD/MMBtu for methanol versus fuel oil). Roughly, for each megawatt of capacity, a turbine will burn 100 gallons of methanol per hour. Given the historical range of methanol costs, this could mean raw material costs of about 3.5 to 20 cents per kWh. This is a higher and more volatile range than LNG, naphtha, and other energy commodities. Long term competitive price guarantees (or other creative means of supply, such as using flexible-feed turbine operations) would likely need to be crafted before methanol see significant use in this area. Methanol-to-Gasoline (MTG) Recently, the use of methanol and zeolite catalysts in a “MTG” (methanol to gasoline) process has come back into the commercial spotlight. MTG converts a high yield of gasoline from methanol (along with a small amount of LPG and even smaller amounts of fuel gas), a technology developed by Mobil and implemented in New Zealand in the mid 1980’s, and improved in the past few years. Commercial developments have been swift, particularly in the United States and in China, with sponsor countries looking to tap coal resources, taking advantage of a record spread between coal and gasoline prices. A MTG demonstration plant in Shanxi province, China (2800 barrels per day of gasoline) started operations in 2009. The company claimed that on-test gasoline was produced 60 hours after the initial start-up. Further exapansion of this facility has been planned, although the realization has been slower than envisioned. At the moment, ExxonMobil is leading the technological push into the market for this technology, offering licenses to interested parties. The positives of this technology include the ability to quickly provide self-sufficiency in gasoline supply using abundant coal resources, and the ability to consider locations that do not have access to barge or ship transportation (as FT processes to liquids require very bulky reactor sizes). This move will be able to gain some advantage on the new law limiting further CTL projects in China that was announced in year 2008. However, it is worth noting that the New Zealand facilities were idled due to lack of economic efficiency; i.e. the process puts hope in the continued spread between gas/coal and gasoline prices, and could place the risk for fluctuation on the shoulders of the operating company.


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OTHER METHANOL USES Methanol has a wide variety of existing and future potential uses, which are currently small relative to the major consumption areas. This section will briefly review a few of the more significant “other” outlets for methanol consumption. Chloromethanes (Methyl Chloride, Methylene Chloride) Chloromethanes come in four molecular varieties, each one with different amounts of chlorine: monochloromethane (methyl chloride), dichloromethane (methylene chloride), trichloromethane (chloroform), and tetrachloromethane (carbon tetrachloride). Methanol and chlorine are the starting materials for each of these molecules. Applications/Markets Methyl Chloride Methyl chloride (monochloromethane), CH3Cl, is a colorless gas with a very mild odor and sweet taste. Methyl chloride is handled commercially as a liquid. Large-scale production began in the United States about 1920, chiefly to meet refrigerant requirements. Manufacture in the United Kingdom began in 1930. Production increased greatly after 1943, when methyl chloride was required as the starting material for methyl silicones and fluorinated refrigerants. After World War II, methyl chloride production in the United States increased more than tenfold. Today, methyl chloride is the basis for hundreds of commercially significant processes, with the largest of these for the production of silicones (elastomers, fluids, and resins, representing over 75 percent of methyl chloride use). Silicone fluids are widely used as processing aids (e.g., surfactants, release agents, lubricants), chemical specialties (e.g., cosmetics, polishes), paper coatings, and electrical, pharmaceutical and medicinal applications. Silicone elastomers are used by the construction industry in sealants and adhesives. And silicone resins are used in high-temperature duty and weather resistant coatings. Methylene Chloride Methylene chloride (dichloromethane, methylene dichloride), CH2Cl2, is a colorless, heavy liquid with a pleasant ethereal odor. The chemical became industrially important during World War II, mostly in the metal working industry. Production reached its zenith in the late 1970s and early 1980s, after which the methylene chloride market began to shrink because of 1985 US National Toxicology Program (NTP) study that indicated carcinogenicity in mice. For use in paint strippers, one of its first (and today still largest) applications, methylene chloride is blended with other chemical components to maximize its


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effectiveness against specific coatings. Typical additives include alcohols, acids, amines or ammonium hydroxide, detergents, and paraffin wax. Paint stripping formulations without methylene chloride have not as yet been shown to be as effective as those with methylene chloride. Methylene chloride is used as an extraction solvent for the decaffeination of coffee, spices, and beer hops because of its strong solvency power and stability and is well suited for use in the manufacture of photographic film as well as a carrier solvent in the textile industry. It is also used as a solvent for vapor degreasing of metal parts. Methylene chloride may also be blended with petroleum and other chlorinated hydrocarbons for use as a dip-type cleaner in the metal-working industry. Use in this area is falling because of recycling and recovery efforts on the part of end users. Aerosol applications are expected to continue to decline because of a government cancer-labeling requirement on consumer goods containing methylene chloride. The reduction in the use of 1,1,1-trichloroethane because of the Montreal Protocol and clean air legislation may increase the use of methylene chloride. Other applications include low pressure refrigerants, air-conditioning installations, and as a low temperature heat-transfer medium. There are several uses for methylene chloride in chemical processing, including the manufacture of polycarbonate plastic from bisphenol and phosgene, the manufacture of photoresist coatings, and as a solvent carrier for the manufacture of insecticide and herbicide chemicals. Methylene chloride is also used by the pharmaceutical industry as a process solvent in the manufacture of steroids, antibiotics, vitamins, and to a lesser extent as a solvent in the coating of tablets. Other uses include grain fumigation and oil dewaxing. Demand for methylene chloride took a downturn after the 1985 NTP carcinogenicity tests, although recovery has taken place since then, mainly on the strength of polycarbonate plastic demand globally. Growth should therefore be positive globally over the forecast period, with the largest increases expected in less regulatory-capable countries, such as China. Chloromethane Capacity - Overview Commercial chloromethane manufacture begins with the reaction of methanol and hydrogen chloride over aluminum oxide catalyst, with the product being a collection of other chloromethanes (methylene chloride, chloroform and carbon tetrachloride), which can be co-produced in the same process, depending upon reactant stoichiometry. Most importantly, demand for methanol from methyl chloride is dictated by more than just methyl chloride use. For the purposes of this study, only methyl chloride and ethylene chloride uses will be considered). The principal global methyl chloride producers and their capacities are shown in the Appendix. These capacities do not include captive production capacity used to make other chloromethanes. Production capacity is generally distributed evenly around


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the globe, as trade is limited, with the focus of new capacity additions on Asia. Trade Due to their toxicity (and in some cases their classification as possible carcinogens), methyl chloride as well as the other chlorinated methanes are heavily regulated at most government levels, and their trade is restricted as a result. Reducing Agent (in production of Chlorine Dioxide) Chlorine dioxide (ClO2) is a highly oxidative chemical which is used in significant amounts to disinfect a broad spectrum of materials. Wood pulp bleaching is the largest use of chlorine dioxide (roughly 95 percent of all ClO2 consumed). Unlike other oxidizing bleaches such as ozone, hydrogen peroxide, oxygen, or chlorine, ClO2 does not attack cellulose, and thus preserves the mechanical properties of bleached pulp. ClO2 is also used in smaller amounts as a biocide, drinking water treatment, food processing, cooling towers, and oil recovery. Chlorine dioxide is one of many antimicrobial agents being considered for use in anthrax decontamination efforts because of its effectiveness against spore-forming bacteria. ClO2 is highly unstable (explosive at low concentrations in atmospheric conditions), and therefore is always produced at or near the location of use. Chlorine dioxide is produced from sodium chlorate via the reduction of the chlorate ion in the presence of strong acid. The acid and reducing agents must be constantly added to maintain the reaction. One major commercial route (Solvay/improved Solvay) uses methanol as the reducing agent (source of hydrogen), and sulfuric acid. Products from this process are chlorine dioxide, formic acid, and carbon dioxide. There are also many other routes to ClO2 which do not utilize methanol, although methanol based routes have enjoyed commercial success based on relative ease of handling versus hydrogen peroxide and electrolysis of chlorine in water. The use of ClO2 is predominantly in countries with large pulp bleaching operations, which are typically those with large access to forest products and access to abundant levels of chlorine. Estimates of use globally are roughly 1.9 to 2.5 million tons per year, predominantly in the US, Canada, Japan, Europe, and Russia. Some use in Southeast Asia is also reported. This total amounts to a roughly estimated 0.8 to 1.5 million tons of methanol consumption annually. The costs of manufacturing chlorine dioxide from sodium chlorate vary for different processes depending on scale, the degree of integration with chlorate manufacture, and the disposition of by-products produced from chlorine dioxide production. The principal costs of chlorine dioxide manufacture are determined by the consumption of sodium chlorate, acid, and reducing agent, together with the fixed costs of operating and maintaining the facility. Estimates range from US$1000 to US$1800 per metric ton.


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Methanethiol (Methyl Mercaptan) Thiols (originally called mercaptans) are organic sulfur compounds with versatile chemical profiles that can be incorporated into many molecules. They are essential as feedstocks in the manufacture of many types of rubber and plastics. They are also utilized as intermediates in agricultural chemicals, pharmaceuticals, in flavors and fragrances, and as animal feed supplements. There are many thiols that occur in nature, including co-enzymes, which assist in fatty acid cell processes, as well as structures that provide a defense mechanism in the scent of skunks. Methanethiol (aka methyl mercaptan) is the most chemically simple of the thiols (CH3SH), and is primarily used with acrolein in the manufacture of DL-methionine (one of a class of amino acids used to fortify plant proteins, e.g. soybean, for animal feed). Methanethiol is made commercially using methanol substitution with hydrogen sulfide. DL-methionine is being manufactured all around the world, with a large proportion used in the Asian area. Globally, this amount requires roughly 0.47 million tons of methanol annually. Evonik Industries will build a new production complex for the amino acid DL-methionine for animal feeds in Singapore. This vertically integrated complex will produce DL-methionine and all strategically important intermediates. This facility is expected to come on stream in late 2015. The global demand for DL-methionine in its primary use as a feed supplement varies considerably depending on such factors as soybean harvests. Gas Dehydration In the extraction of natural gas (“field gas”) from underground reservoirs, methanol is a useful agent in preventing the formation of particulates which can disrupt production. Methanol in this application is typically injected “downhole,” and has found increasing acceptance in this role, especially in offshore applications thanks to its easy large scale packaging capability (isotainers). While statistics on this application are not published, it is estimated that almost 225,000 metric tons per year of methanol is used in this application, with large potential scope for growth.

Chapter IV - Methanol and Derivatives Market Overviews and Uses · 2018-06-08 · Chapter IV -...

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