Overview: Coastal methanol port inventories drew down again in Wednesday’s data, with the decline exceeding last week’s expectations. The main reason was that withdrawals from major social warehouses along the Yangtze River in Jiangsu exceeded initial forecasts. The anticipated demand destruction from high prices has not clearly materialized. Meanwhile, the stronger inland market has dimmed prospects for near-term replenishment from domestic sources. As a result, the market pullback at the end of August may have prompted some end-user restocking, which in turn supported offtake from the main storage areas.
On the downstream profitability front, the latest strong pickup in methanol prices is inevitably squeezing downstream margins. Overall, MTO (calculated to monomer) faces the most visible margin erosion. However, given that coastal olefin operating rates are already low, feedstock availability is the core factor affecting olefin consumption at present. The olefin plants expected to adjust operating rates produce different end products, and their margins remain relatively acceptable. Other traditional downstream sectors are entering their seasonal peak period, so margin compression from rising feedstock prices is limited, and essential demand continues to support overall market consumption.
Over the weekend, the U.S. and Iran were still exchanging fire, while floating storage in the key Middle East region kept rising. Although some vessels did switch off their positioning signals and sail beyond the blockade line during the week, it remains difficult to set a firm expectation for a recovery in import supply. Therefore, the recovery of inland domestic supply over the coming weeks becomes all the more important. In this round, domestic supply is unlikely to give additional upward support to prices, with many planned and unplanned outages and continuously falling producer inventories. But according to Chempricehub data, domestic spot supply will increase markedly from mid-month as plants restart. In October, newly commissioned units will also come on stream and plan to market substantial volumes externally. As a result, the regional spread between inland and coastal markets may shift notably, with the key focus being olefin plants’ procurement of inland cargoes.
Looking ahead, macro factors such as the Strait of Hormuz and crude oil remain the dominant price drivers. If import supply remains constrained, the coastal supply-demand balance will stay unresolved, and inventories could fall to extremely low levels. On the fundamental side, close attention should be paid to the recovery of inland supply and to stockpiling activity ahead of the National Day holiday.
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