Review

Last Week Recap:

In the last cycle, low arrival volumes of foreign vessels, combined with export vessel demand supporting cargo withdrawals, led to a decline in port methanol inventories, providing support to the coastal methanol market. In the inland methanol market, multiple methanol plant maintenance schedules resulted in temporarily low production levels, and low inventories also supported prices. This week, the coastal methanol market continued to experience low foreign vessel arrivals, leading to further declines in port inventories. In the inland methanol market, methanol plants resumed operations, but overall market sentiment was weak, causing the domestic methanol market to exhibit volatile and weak performance.

Methanol Focus Points:

• Short-term: Changes in the international situation; Status of international plants and logistics; Changes in market circulating volume.
• Medium to Long-term: Persistence of the international situation; Expectations for import recovery; Expected changes in downstream plant operations.

Table of Contents: 1: Downstream Methanol Capacity Utilization Mainly Increased 2: Domestic Methanol Market Weakened 3: International Oil Prices Fell, Expected Downside Next Week 4: Summary and Outlook

1. Downstream Methanol Capacity Utilization Mainly Increased

Coal prices were relatively strong, while methanol prices in Northwest China were weak. Profit margins for coal-to-methanol narrowed but remained considerable. Domestic supply increased as domestic plants resumed operations, while import supply remained low. Orders and contracts for methanol production plant inventories were executed smoothly during the period, leading to inventory drawdowns. Port methanol inventories also declined due to low import supply. Downstream plant operating rates mainly increased, leading to higher downstream consumption volumes.

2. Domestic Methanol Market Weakened

Specifically, the port methanol market this period showed volatile and slightly weak performance. During this cycle, port methanol inventories declined as expected due to low import supply. The coastal market circulating volume fell to low levels, with expectations of further declines, providing support for absolute coastal prices. However, influenced by changes in macroeconomic sentiment, prices weakened slightly during the week. Inland methanol prices declined slightly this period. Multiple plants in the production areas resumed operations and started production successively, leading to a steady recovery in market supply. However, industry inventories remained at low levels. Combined with sustained external procurement by the downstream olefins sector, which provided a supporting role for demand, the inland market prices faced downward pressure but overall declines narrowed, showing limited downside.

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

| Type | This Week | Next Week Est. | Week 2 Est. (Note: Original "第二周预估", likely Week+2) | Week 3 Est. (Note: Original "第三周预估", likely Week+3) |
| :--- | :--- | :--- | :--- | :--- |
| Enterprise Inventory | 34.35 | 35.73 | 36.41 | 35.59 |
| Port Inventory | 66.20 | 60.00 | 66.00 | 68.00 |
| Total Methanol Production | 204.93 | 211.39 | 209.57 | 206.56 |
| Coal-based Production | 171.82 | 175.96 | 174.10 | 171.01 |
| Coke Oven Gas-based Production | 18.35 | 19.42 | 19.43 | 19.52 |
| Natural Gas-based Production | 13.84 | 15.10 | 15.11 | 15.11 |
| CO2 Hydrogenation-based Production | 0.22 | 0.22 | 0.22 | 0.22 |
| Submerged Arc Furnace Off-gas Production | 0.70 | 0.70 | 0.70 | 0.70 |
| Import Volume | 4.80 | 6.32 | 14.08 | 10.90 |
| Total Supply Volume | 209.73 | 217.71 | 223.65 | 217.46 |
| Export Volume | 1.90 | 4.83 | 1.00 | 1.00 |
| MTO Consumption | 106.15 | 98.59 | 102.62 | 105.56 |
| Formaldehyde Consumption | 15.41 | 14.38 | 14.64 | 14.79 |
| Other Consumption | 95.69 | 104.73 | 98.71 | 94.93 |
| Total Consumption Volume | 219.15 | 222.53 | 216.97 | 216.28 |
| Supply-Demand Balance | -9.42 | -4.82 | 6.68 | 1.18 |

Source: chempricehub Intelligence

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

The logic of low foreign vessel arrivals and destocking was already clear. The sideways decline in methanol prices this week was mainly driven by market funds pricing in the expected reopening of the Strait, putting pressure on futures prices. However, spot basis strengthened to +300 RMB/ton or higher. It is expected that the relatively favorable methanol fundamentals will continue to compete with market expectations regarding the Strait reopening.

This week, domestic methanol capacity utilization surged significantly, leading to higher actual output. As futures prices declined, downstream procurement enthusiasm weakened, and the negotiation focus in the main production areas moved lower.

In the next cycle, foreign vessel arrivals are expected to remain low, while inland supply flow will remain high. Downstream demand is平淡 (flat/ordinary), but export vessel demand supports cargo withdrawals. Overall, port methanol inventories are expected to continue declining. Focus will be on export vessel loading schedules and the replenishment situation from inland sources.

This week, inland enterprise inventories declined as expected. Although some plants in the production areas restarted after maintenance, a new round of long-term contracts began, and order withdrawals from previous periods were active. Additionally, some enterprises in Central China were affected by the delivery of vessel-based orders. Therefore, inventories decreased cyclically. Looking ahead, inland enterprise inventories are expected to increase slightly but will remain at historically low levels. Focus will be on the ramp-up speed after the restart of some projects in the production areas by the end of May, and the intensity of continued domestic cargo flow into the coastal areas.

Enterprise orders decreased cyclically this period. Reduced demand in the Northern Shandong (Lu Bei) area also slowed procurement of raw materials. Additionally, the cyclic correction in futures prices limited buying interest for new orders. Therefore, pending orders declined compared to last week. Looking ahead, enterprise order volumes are expected to increase slightly. Although upstream spot supply is currently tight, downstream demand for restocking based on actual needs persists. Keep a close watch on the procurement intensity of downstream enterprises in the Lu Bei area.

This week, methanol prices weakened slightly. Some regional markets saw downstream restocking demand, improving buying interest. Downstream enterprise weekly external procurement volumes and raw material inventories both increased slightly.

There were plant shutdowns or rate reductions in East China, leading to a decline in the regional average weekly operating rate.

This week, profits for MTO enterprises in East China decreased. Coastal methanol market prices retreated, lowering production costs. However, olefin monomer prices fell more significantly during the week, causing production profit losses for these enterprises to worsen further. This week, the domestic propylene market declined before recovering later. After the propylene price surge, downstream acceptance of high prices decreased, indicating a possible weakening trend. Asian ethylene market prices remained weak this week, with the decline widening during the period; the supply-demand weakness in the East China market has not yet reversed, maintaining a weak performance.

3. International Oil Prices Fell, Expected Downside Next Week

International oil prices fell this week. The main bearish factor was the market's optimistic expectation of a peace agreement between the US and Iran and the reopening of the Strait of Hormuz. Geopolitical tensions eased, and concerns over supply risks diminished.

International oil prices are expected to have room to fall next week, with WTI potentially trading between 85-93 USD/barrel and Brent between 90-99 USD/barrel.

4. Summary and Outlook

1. Supply: Domestic supply continues to recover and increase, while import supply remains low. Overall, the methanol market maintains a tight supply situation recently.
2. Demand: Downstream is in an off-season, and with high prices, downstream purchasing sentiment is generally average. Attention needs to be paid to the impact of downstream profits and downstream raw material inventories on downstream plant operating rates.
3. Inventory: Port methanol inventories are expected to decrease mainly due to the expectation of low import supply. Inland production enterprise inventories may consolidate at low levels with fluctuations.
4. Raw Materials: With constantly changing supply-demand dynamics, traders hold high expectations for future coal prices and have a strong bullish sentiment. If terminal restocking demand is released gradually, coal prices may still have some room for a slight increase. Production costs provide some support to the methanol market.

Overall Logic:

• Conclusion (Short-term): In the short term, low import supply continues, port methanol inventories decline, and inland producer inventories are also low. However, with the resumption of plants, domestic supply is expected to increase. Demand is tepid (off-season). Overall, the domestic methanol market shows tight supply, with expectations of declining market circulating volume. However, the main influencing factor may still be macroeconomic sentiment. The domestic methanol market is expected to operate with volatile consolidation recently.

• Conclusion (Medium to Long-term): In the medium to long term, methanol fundamentals are significantly influenced by international plant operating rates and international logistics situations, presenting considerable uncertainty. Monitor the developments of domestic and international methanol and downstream plants.