Overview

Last Week Review:
Last week, the arrival of foreign vessels at coastal methanol markets remained low, leading to a continuous decline in port inventories. In the inland methanol market, methanol units resumed operations, and overall macroeconomic sentiment was weak, resulting in a volatile and weak performance across the domestic methanol market. This week, foreign vessel arrivals continued at low levels, and export shipments supported offtake. However, domestic cargo supplies remained ample, and truck-based offtake from major storage areas was poor, leading to only a narrow decline in inventories. Domestic supply continued to recover and increase, but order execution was smooth, production enterprise inventories were low, and offtake was limited.

Methanol Focus Points:

• Short-term: International plant operations and logistics; changes in market circulating volumes; changes in downstream plant operating expectations.
• Medium-to-long term: Sustainability of the international situation; recovery expectations for imports; changes in downstream plant operations.

| Contents: 1. Mixed Performance in Methanol Chain 2. Domestic Methanol Market Volatility 3. International Oil Prices Rise, Room for Decline Next Week 4. Summary and Outlook |
| :--- |

1. Mixed Performance in Methanol Chain
Both coal and Northwest China methanol prices were relatively strong, resulting in little change in coal-to-methanol margins. Domestic methanol production increased due to the restart of idled units, but production enterprise warehouse inventories fell significantly due to smooth order execution. Import volumes remained low, and port methanol inventories continued to decline. Capacity utilization at many downstream plants decreased, reducing methanol consumption.

2. Domestic Methanol Market Volatility
Specifically, the port methanol market experienced volatility this period. In coastal markets, domestic cargo supplies remained high. Truck-based offtake from major storage areas was poor, but export shipments supported offtake. Additionally, foreign vessel arrivals were low, leading to a narrow decline in port methanol inventories and low market circulating volumes, which provided support for absolute prices. However, weak downstream buying interest likely capped upside potential, resulting in an overall volatile and consolidating market. Inland methanol prices rose steadily this period. Inland plants conducted concentrated pre-sales and oversold orders, and truck loading was disrupted in many regions. Furthermore, a recovery in futures prices boosted market sentiment. Driven by the operational logic of buying on dips and hedging, spot quotations generally rose across regions.

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

| Type | Current Week | Week 1 Estimate | Week 2 Estimate | Week 3 Estimate |
| :--- | :--- | :--- | :--- | :--- |
| Enterprise Inventory | 32.15 | 32.37 | 32.39 | 31.37 |
| Port Inventory | 63.35 | 66.00 | 64.00 | 62.00 |
| Total Methanol Production | 206.92 | 206.94 | 204.65 | 205.19 |
| Coal-based Production | 172.10 | 171.67 | 169.43 | 169.97 |
| Coke Oven Gas-based Production | 19.32 | 19.25 | 19.24 | 19.24 |
| Natural Gas-based Production | 14.59 | 15.10 | 15.06 | 15.06 |
| CO2 Hydrogenation-based Production | 0.22 | 0.22 | 0.22 | 0.22 |
| Ferroalloy Furnace Gas-based Production | 0.70 | 0.70 | 0.70 | 0.70 |
| Import Volume | 5.70 | 9.10 | 11.10 | 9.20 |
| Total Supply | 212.62 | 216.04 | 215.75 | 214.39 |
| Export Volume | 3.73 | 1.50 | 4.12 | 1.00 |
| MTO Consumption | 98.20 | 101.28 | 102.76 | 104.13 |
| Formaldehyde Consumption | 14.45 | 14.27 | 14.45 | 14.45 |
| Other Consumption | 101.29 | 96.12 | 96.40 | 97.83 |
| Total Consumption | 217.67 | 213.17 | 217.73 | 217.41 |
| Supply-Demand Balance | -5.05 | 2.87 | -1.98 | -3.02 |

Source: chempricehub Information

Notes:

1. Total methanol production is based on full sample statistics.
2. Total Consumption = MTO Consumption + Formaldehyde Consumption + Other Consumption (Acetic Acid, DME, Chlorides, MTBE, DMF, MMA, Dimethyl Carbonate, BDO) + Export Volume.
3. Total Supply = Total Methanol Production + Import Volume.
4. Supply-Demand Balance = Total Supply - Total Consumption.

Domestic arbitrage and the off-season led to a renewed slowdown in the destocking pace. Macro factors and persistently strong inland markets may continue to support overall strong price performance.

This week, domestic methanol capacity utilization continued to rise, increasing actual output. Downstream purchasing was active, market transactions improved, and futures prices rose, driving up the negotiation center in the main producing areas.

Next week, domestic cargo replenishment will continue, but foreign vessel arrivals are relatively concentrated. Spot cargo sales have been average recently, and overall truck-based offtake may remain low. Overall, port methanol inventories are expected to accumulate next week. Specific attention should be paid to the unloading speed of foreign vessels and vessel departures.

This week, inland enterprise inventories continued to decline. Besides temporary shutdowns/planned maintenance at some units in Inner Mongolia and Shandong leading to local supply reductions, downstream orders and long-term contract offtake remained stable. Consequently, total inventories fell during the period. Looking ahead, inland enterprise inventories may increase slightly. However, driven by pre-sales of some volumes, the overall inventory level is expected to remain relatively low. Monitor the restart progress of some temporarily shut projects in the producing areas.

Enterprise order volumes increased this period compared to the previous cycle. Although retail sales volumes in the main producing areas of Shaanxi and Inner Mongolia decreased, the strong futures market and tight spot supply stimulated new order intake in Guanzhong, Central China, and other regions, increasing total pending orders. Looking ahead, enterprise order volumes are expected to decline. Some traditional summer downstream demand is average, and bearish macro factors on commodities may somewhat curb buying interest.

This week, external procurement volumes for downstream methanol consumers remained largely unchanged. Some downstream plants saw a narrow decline in feedstock inventories due to essential demand consumption.

Units at Ningbo Fude are under shutdown, and loads at some other coastal and Shandong units decreased slightly, leading to lower operating rates.

MTO enterprise profits in East China declined this week. Coastal methanol prices rose, significantly increasing MTO enterprise costs. However, the propylene market has been on a downward trend recently, and while ethylene prices rose slightly, MTO enterprise production margins are still under passive pressure and worsening. Asian ethylene prices stabilized after falling this week. East China ethylene prices fell first and then rose, with the supply-demand balance gradually improving. The domestic propylene market showed a weak consolidation trend this week, driven by a combination of macro sentiment, cost changes, and supply-demand chain dynamics.

3. International Oil Prices Rise, Room for Decline Next Week
International oil prices rose this week. The main bullish factor was continued low-intensity military friction between the US and Iran, and Iran's strikes on some targets within Kuwaiti territory, which intensified market concerns about the prospects for negotiations and supply risks.

It is expected that international oil prices have room to decline next week, with WTI potentially trading between $90-98/barrel and Brent between $92-100/barrel.

4. Summary and Outlook

1. Supply: Domestic supply is expected to remain high overall, despite plant changes. Import supply will continue at low levels, but foreign vessel arrivals may be relatively concentrated in the next two weeks.
2. Demand: It is the downstream off-season, with weak buying interest in some markets. Attention should be paid to the impact of downstream plant changes on the market supply-demand structure.
3. Inventory: Overall, port methanol inventories will fluctuate with changes in foreign vessel arrivals and downstream consumption, but are expected to remain low overall. Under the execution of orders, inland methanol producer warehouse inventories are also likely to remain low in the near term.
4. Feedstock: Amid the changing supply-demand landscape, total coal supply in the market is relatively ample. Due to the rapid price increase last week, downstream resistance to high prices has intensified. Some coal mine sales have slowed. Downstream procurement is mainly for essential needs, and overall restocking demand release is limited. Short-term chemical coal prices are expected to continue volatile and narrow movements. Production costs provide some support to the methanol market.

Overall Logic:

• Conclusion (Short-term): In the short term, the coastal methanol market shows a situation of weak supply and demand. The market may consolidate with volatility influenced by macro sentiment. Inland methanol producer warehouses, supported by smooth order execution, are likely to remain low, providing strong support for the inland methanol market.
• Conclusion (Medium-to-long term): In the medium-to-long term, methanol fundamentals are significantly impacted by international plant operating rates and international logistics, presenting considerable uncertainty. Monitor developments in domestic and international methanol and downstream plants.