Overview

Last Week Review:

Last week, driven by macro sentiment and expectations of tight supply, the domestic methanol market rose strongly. In the first half of this week, methanol extended its gains. Midweek, however, the market quickly cooled and prices fell sharply on changing geopolitical news, before rebounding somewhat on news of downstream unit changes.

Methanol Focus Points:

Short term — Strait of Hormuz transit conditions; changes in import volume expectations; downstream unit changes.

Medium-to-long term — geopolitical developments; changes in international methanol units; changes in domestic upstream/downstream units.

Contents:

1. Methanol Industry Chain Weekly Average Prices Largely Firm
2. Domestic Methanol Market Rose First, Then Fell
3. International Oil Prices Fell, with Further Downside Expected Next Week
4. Summary and Outlook

I. Methanol Industry Chain Weekly Average Prices Largely Firm

Both coal and Northwest China methanol prices were firm, with methanol gaining more than coal, and coal-to-methanol margins continued to improve. Domestic methanol supply ticked up as units resumed operations. Producer shipments were strong, and smooth truck-out volumes drew down producer warehouse inventories. In the coastal methanol market, foreign vessel arrivals declined, exports supported cargo pickups, but apparent demand was weak, and port methanol inventories accumulated modestly.

II. Domestic Methanol Market Rose First, Then Fell

Specifically, the port methanol market rose first and then fell during this period. Over the course of the week, apparent demand in the coastal market weakened, but export vessel loadings supported offtake. Port methanol inventories accumulated slightly but remained at low levels overall, and prices stayed firm at the start of the week. Midweek, prices pulled back rapidly under the influence of macro sentiment. Going forward, continued attention should be paid to how geopolitical developments affect expected changes in the coastal supply-demand structure. During this period, the inland methanol market also rose first and then fell. At the start of the week, sentiment drove prices higher, but the geopolitical premium gradually faded and prices corrected sharply. That said, supported by unit maintenance and low inventories, the downside for the inland market remained relatively limited.

Table 1 Methanol Weekly Supply-Demand Balance Sheet (Unit: 10,000 tons)

Source: Chempricehub Information

Notes:

1. Total methanol output is based on full-sample statistics;
2. Total consumption = MTO consumption + formaldehyde consumption + other consumption (acetic acid, dimethyl ether, chlorides, MTBE, DMF, MMA, dimethyl carbonate, BDO) + export volume;
3. Total supply = total methanol output + import volume;
4. Supply-demand balance = total supply − total consumption.

The core logic for current methanol prices continues to hinge on Strait transit conditions. Overnight, news of US-Iran talks resurfaced, and crude oil and methanol pulled back sharply. At present, September import supply is expected at around 400,000 tons, and vessel sailing schedules over the coming week will be especially important in determining the final September import volume. Port inventories are expected to begin drawing down again from early September; a drawdown of 100,000–150,000 tons is currently projected for September. Continued attention should be paid to macro news developments.

This week, domestic methanol capacity utilization rose marginally and market supply increased. However, the sharp rise in futures boosted trading sentiment and lifted downstream purchasing enthusiasm, driving prices sharply higher in the main producing regions.

Next week, foreign vessel arrivals are expected to continue falling week-on-week, export vessel loadings are expected to ease, and apparent import demand may remain low. Overall, port methanol inventories are likely to see little change next week; attention should be paid to changes in cargo pickup volumes.

During this period, inland methanol producer inventories continued to decline. In addition to some methanol projects in Northwest China, Central China, and North China remaining under maintenance, the sharp rally in the futures market in the first half of the week prompted order replenishment. Combined with the tail end of long-term agreements in the producing regions, active transfer of earlier orders, and continued spot sales by upstream producers, upstream destocking was achieved. Looking ahead, inland producer inventories are expected to build, with close attention to the intensity of midstream/downstream buying and the pace of restarts for maintenance projects at the end of August.

During this period, enterprise pending order volumes declined week-on-week. As geopolitical factors drove commodities higher before pulling back, earlier orders were digested faster while new order placement shrank somewhat — for example, large olefin plants in the producing regions did not purchase externally during the cycle — so overall order volumes moved lower. Looking ahead, pending order volumes are expected to continue declining slightly, with the focus on downstream procurement intensity.

As methanol prices kept rising, some downstream players turned more wait-and-see, buying sentiment weakened, external purchase volumes declined, and transport restrictions in some regions due to weather and other factors reduced feedstock methanol inventory consumption.

This week, Xinjiang Hengyou's unit was restarted, but previously idled enterprises remained under maintenance, so the weekly average operating rate still declined.

This week, the weekly average margin of East China MTO enterprises continued to fall from the prior week. Although feedstock methanol prices have pulled back, they remain at high levels overall, and cost pressure is still evident. This week, the Northeast Asian ethylene market performed firmly overall, with prices rising first and then stabilizing at high levels; the East China ethylene market ran in a high-level range. The domestic propylene spot market moved up first and then down this week, driven by both macro sentiment repair and phase-specific supply tightness. Over the week, the USD-denominated market edged lower, mainly due to fundamental bargaining.

III. International Oil Prices Fell, with Further Downside Expected Next Week

International oil prices fell this week. The main bearish factor was that mediators continued to push the US and Iran back to the negotiating table, improving expectations for navigation through the Strait of Hormuz and easing geopolitical and supply concerns.

International oil prices are expected to have further downside next week, with WTI possibly ranging between $77–84/barrel and Brent between $82–89/barrel.

IV. Summary and Outlook

1. Supply: In September, several large methanol units in Northwest China have maintenance plans, but multiple previously idled units are gradually restarting, so domestic supply is expected to increase gradually; attention should be paid to how these units actually materialize. On the import side, the Strait of Hormuz has not yet reopened, and import volumes remain persistently low.

2. Demand: Overall, downstream consumption is expected to fluctuate higher, but the impact of downstream margins and feedstock inventories on downstream operating rates should be monitored.

3. Inventory: Inland producer warehouse inventories are likely to increase slightly alongside the rise in domestic supply, but are still expected to remain at low levels overall. Port methanol inventories are expected to decline gradually due to persistently low import volumes.

4. Feedstock: In the short term, the market features strong supply constraints and a moderate demand pullback. Coal prices are fluctuating firm, and production costs provide support to the methanol market; Southwest China's natural gas-based methanol margins remain thin.

Overall Logic:

Conclusion (Short-term): In the short term, domestic supply is expected to recover and increase in September, import volumes remain low, and demand carries some uncertainty. Overall, inventories are expected to stay at low levels, with fundamentals supporting the market. The impact of macro sentiment should be monitored.

Conclusion (Medium-to-long-term): Over the medium-to-long term, on the supply side, domestic supply mainly depends on startup/shutdown activity at domestic methanol units, while import supply depends primarily on Strait of Hormuz transit conditions. On the demand side, several large downstream plants in coastal areas are significantly affected by margins and feedstock inventories. Overall, uncertainty remains high, but fundamentals are trending positive, and the market is expected to remain strong.