Will China continue to invest in coal- and methanol-to-olefins?
Coal-to-olefins (CTO) was once regarded as the bright new hope of the olefins industry in China. However, recent low crude oil prices and resultant lower global olefins prices have impacted the economics of such projects very negatively, and CTO margins have been squeezed by over 50% in 2015, compared with 2014. This has cast a shadow of doubt on the viability of these highly capital-intensive investments. We compare the economics of coal- and methanol-based olefins with the traditional naphtha cracking route to olefins in Asia, and examine how their respective cost positions and ROI outlook have changed in the current low crude oil price environment. In addition, we highlight the key policy details of China's 13th five-year-plan draft that will impact the coal-based olefins industry, and discuss how the evolving regulatory framework is expected to shape the future of this still-nascent industry. Ultimately, we aim to answer the question "Will China continue to invest in CTO and MTO?"