Introduction: Over the past month, China’s domestic methanol market has been driven by multiple factors—macroeconomic tailwinds, tight supply, rising feedstock prices, and pre-holiday restocking by downstream users—with prices continuing to surge to historic highs; some regional markets even broke through previous record highs. During the week, amid high feedstock prices and insufficient feedstock inventories, several downstream production enterprises planned shutdowns, and the impact of downstream negative feedback on the market gradually became apparent.
Since early August, domestic methanol market prices have shown a strong and rapid upward trend, driven by the resonance of four factors: macro conditions, costs, supply, and demand.
From the renewed closure of the Strait of Hormuz to the repeated escalation of the US-Iran conflict, geopolitical conflict has become a core variable affecting China’s methanol market.
Rising coal prices have pushed up the cost of coal-based methanol, and the cost side has also helped drive methanol prices higher in the inland market.
Under the impact of geopolitical conflicts, China’s methanol imports rapidly contracted, gradually exposing a tight supply situation in the coastal methanol market and leaving already stretched port methanol inventories in a precarious position. As a result, the coastal methanol market began to lead the domestic methanol market upward. During the same period, because the recovery of domestic methanol production and supply was not fast and inventories remained low, the inland market closely followed the coastal market and even at times posted larger gains. The price spread between the coastal and inland markets failed to widen, and inland supply could not supplement the coastal market, making it difficult to ease expectations of tight supply in the coastal methanol market.
Overall, the domestic methanol market has shown a tight supply situation, and supply-side support has further amplified the upward momentum in domestic methanol prices.
Demand-side performance was mixed. Some downstream sectors followed price increases well and maintained healthy margins, so their operating rates were not constrained by profitability. Other downstream sectors lagged in passing through price increases, saw margins decline, and some units were expected to shut down. Over the past month, although some downstream sectors were affected, the overall impact on prices was limited. In addition, some downstream users had pre-holiday restocking demand; amid the upward market, some enterprises restocked early, which also became one of the factors driving prices higher.
In addition to profitability, downstream enterprises’ feedstock inventories are also an important factor affecting unit operations. For example, some coastal downstream units are expected to shut down due to feedstock inventory constraints.
From the overall market situation, strong macro sentiment, high costs, tight supply, and still-acceptable downstream performance have combined to drive methanol prices sharply higher over the past month. However, based on recent expectations, downstream operating rates may trend lower due to feedstock inventory and profitability conditions. Given the reality of high absolute prices, demand-side expectations are likely to weaken, which will exert some negative feedback on methanol prices. Nevertheless, long-term price trends still require close attention to the geopolitical situation and its impact on China’s domestic methanol supply side.
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