Last week, the market underwent wide-range fluctuations and consolidation under the alternating influence of macroeconomic sentiment and fundamentals. This week, escalating geopolitical tensions, combined with declining inventories, kept expectations of tight supply unresolved. Market sentiment ran high, driving prices sharply upward.
Short term: Geopolitical developments; changes in import volume expectations; changes in coastal downstream plant operations.
Medium-to-long term: Geopolitical developments; Strait of Hormuz transit conditions; changes in domestic upstream and downstream plant operations.
Contents:
Both coal prices and methanol prices in Northwest China trended firm, with methanol posting larger gains than coal, further improving margins for coal-to-methanol producers. Domestic methanol supply increased slightly as plants resumed operations. Amid the rising market, producers sold smoothly, and factory inventories declined. In the coastal methanol market, arrivals from foreign vessels continued to fall, and port methanol inventories declined, supported by export shipments underpinning offtake and steady demand-side consumption.
In detail, port methanol markets rallied strongly during this period. Over the week, although apparent import demand increased modestly and exports supported cargo offtake, inbound arrivals from foreign vessels contracted period-on-period, leading to lower port methanol inventories. Geopolitical tensions gave a strong boost to market sentiment, and expectations of tight supply provided continued support, driving coastal methanol prices sharply higher. Inland methanol prices also surged this period. Factory inventories stayed at low levels through the week, and the restart of some units was delayed, leaving overall supply relatively tight. Buoyed by market sentiment, traders held back from selling low-priced cargoes, propelling prices to successive highs.
Table 1 Methanol Weekly Supply–Demand Balance Sheet (Unit: 10,000 tonnes)
| Type | This Week | Week 1 Forecast | Week 2 Forecast | Week 3 Forecast |
|---|---|---|---|---|
| Producer inventories | 29.81 | 29.76 | 30.67 | 31.42 |
| Port inventories | 64.15 | 55.00 | 48.00 | 43.00 |
| Total methanol output | 186.39 | 190.49 | 201.04 | 207.04 |
| Coal-based output | 157.00 | 159.34 | 166.99 | 171.70 |
| Coke-oven gas-based output | 16.51 | 17.69 | 18.50 | 19.61 |
| Natural gas-based output | 12.28 | 12.86 | 14.86 | 14.86 |
| CO₂ hydrogenation-based output | 0.18 | 0.18 | 0.18 | 0.18 |
| Submerged-arc furnace off-gas-based output | 0.42 | 0.42 | 0.50 | 0.70 |
| Import volume | 14.92 | 9.90 | 7.30 | 12.80 |
| Total supply | 201.31 | 200.39 | 208.34 | 219.84 |
| Export volume | 2.50 | 3.00 | 2.50 | 1.00 |
| MTO consumption | 93.44 | 95.84 | 100.07 | 103.15 |
| Formaldehyde consumption | 14.70 | 15.17 | 14.75 | 13.61 |
| Other consumption | 96.47 | 95.58 | 97.11 | 106.33 |
| Total consumption | 207.11 | 209.59 | 214.43 | 224.09 |
| Supply–demand balance | -5.80 | -9.20 | -6.09 | -4.25 |
Source: Chempricehub
Notes:
If the Strait remains impassable, coastal methanol inventories are likely to draw down again to their previous lows, which explains the notable strengthening of the basis in recent days. Average weekly arrivals from foreign vessels over the next three weeks may fall below 100,000 tonnes, while routine procurement and exports continue to support offtake. On the assumption that the Strait remains closed, methanol prices are expected to sustain their strength in September.
Domestic methanol capacity utilization posted another slight increase this week, lifting market supply. The futures market surged, trading sentiment continued to improve, and market turnover expanded, keeping prices in major producing regions on a sharp upward path.
In the coming week, arrivals from foreign vessels are expected to fall period-on-period to a relatively low level. Combined with export-supported offtake, port methanol inventories are projected to decline next week; changes in coastal-market cargo withdrawal volumes warrant close attention.
Inland methanol producer inventories continued to decline this period, with inventories across Northwest China, Shandong, North China and other regions moving lower period-on-period. Maintenance at methanol plants in production regions such as Inner Mongolia and Guanzhong continued, and the restart of a particular project was delayed, lending support to the supply side. Meanwhile, the rapid price rally left prices at elevated levels, prompting midstream and upstream players to actively move cargoes and lock in profits. With downstream buyers replenishing opportunistically, upstream cargo transfer was fairly smooth during the period, producing an overall inventory drawdown. Looking ahead, inland producer inventories are expected to continue easing slightly, with the focus on start-up and shutdown fluctuations at methanol plants in key regions.
Producer pending orders increased period-on-period this period. Geopolitical instability continued to cause sharp volatility across commodities. Methanol futures and spot prices posted strong gains during the week, prompting upstream producers to actively realize high profits at elevated price levels, while buyers staged phase-wise chase buying that spurred larger factory sales volumes. Looking ahead, pending orders are expected to edge up, with attention on the sustainability of downstream stockpiling activity ahead of the Mid-Autumn Festival and National Day holidays.
In the rising market, some downstream users purchased on dips to cover essential needs, and external procurement volumes rose modestly. However, some downstream plants did not receive deliveries within the period, and with essential consumption drawing down feedstocks, raw material inventories declined.
Qinghai Salt Lake's unit cut its operating load, while Zhongtian Hechuang's unit resumed and is running normally after restart, lifting the overall industry operating rate.
Weekly average profits for MTO producers in East China fell further from last week. Feedstock methanol prices have been rising substantially, placing considerable cost pressure on MTO plants. Although olefin monomer prices posted notable gains over the week, producer margins continued to be squeezed by feedstock costs. The Northeast Asian ethylene market remained broadly strong this week, with prices stabilizing after hitting highs; ethylene prices in East China kept climbing. The domestic propylene market stayed firm at high levels, with the price center of gravity shifting steadily upward amid tight supply and a geopolitical premium.
International oil prices rose this week, driven mainly by renewed US–Iran military confrontation: several tankers transiting the Strait of Hormuz were attacked, intensifying market concerns over geopolitical and supply risks.
International oil prices are expected to have room for further upside next week, with WTI potentially trading at USD 84–93/barrel and Brent at USD 89–98/barrel.
1. Supply: Although several large methanol plants have scheduled maintenance, domestic methanol supply is expected to increase gradually as idled units progressively resume operations. Import supply, however, remains low, and the timing of its recovery is highly uncertain.
2. Demand: Overall, some downstream sectors are expected to recover, with downstream consumption gradually rising accordingly. The impact of downstream margins and raw material inventories on the pace of recovery warrants monitoring.
3. Inventories: Inland producer factory inventories are expected to remain low, supported by downstream stockpiling and essential consumption. Port methanol inventories are expected to enter a phase of drawdown, given low import supply and expectations that the arbitrage window from inland to coastal markets will remain closed; market cargo withdrawal volumes should be monitored closely.
4. Feedstock: With high temperatures easing nationwide, daily thermal coal consumption for power generation is beginning to show signs of seasonal decline. End users are resistant to high-priced coal and are purchasing only for essential needs. Coal prices are expected to be prone to gains rather than declines in the short term, but lack sufficient momentum for a sharp spike; production costs thus provide support to the methanol market. Meanwhile, margins for natural gas-based methanol in Southwest China remain thin.
Conclusion (Short term): In the near term, import supply remains low, port methanol inventories continue to draw down, inland producer factory inventories remain at low levels, and the volume of marketable supply is limited. From a fundamental perspective, the domestic methanol market is expected to remain strong, although the influence of macroeconomic sentiment on market direction still needs to be watched.
Conclusion (Medium-to-long term): Over a medium-to-long-term horizon, on the supply side: domestic methanol production margins are relatively healthy, so domestic supply is expected to trend upward on the back of restarts; however, planned maintenance at several large plants may curb the pace of supply recovery. Import supply will continue to depend on transit conditions in the Strait of Hormuz. On the demand side: some downstream sectors are expected to recover, while operating rates at other downstream plants may be constrained by production margins and raw material inventories. On balance, the medium-to-long-term methanol market carries considerable uncertainty. Based on current market conditions, expectations of tight supply are set to persist, and the methanol market is expected to maintain its strength.
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