[Introduction]: During the week, methanol port inventories declined due to low arrivals of foreign vessels and the support of exports on loading. However, the main trading logic in the market revolves around the easing of geopolitical tensions and the reopening of the Strait of Hormuz, leading to expectations of a gradual increase in domestic methanol circulating volumes.

I. Domestic Methanol Market Accelerates Decline

From March to May, under the continuous impact of geopolitical conflicts, the overall tight supply of methanol gradually became evident and persisted. Driven by this, the domestic methanol market gradually rose. However, due to losses at the downstream level and weak buying interest, the sustained price increase was limited, and prices moved in a high-level consolidation range after the rise.

Recently, with the release of news about the easing of geopolitical tensions and the actual reopening of the Strait of Hormuz, the support base underneath the methanol market has quickly collapsed. Holders have become more willing to sell, while downstream operations are mainly based on rigid demand procurement. Overall market sales are poor, and prices have fallen rapidly. However, the low absolute port inventory and scarce available cargo provide soft support for near-term prices, giving coastal methanol market prices some resilience in the short term.

II. Key Focus Points Going Forward

Supply side: Mainly focus on the specific pace of import recovery

Recently, domestic methanol prices have dropped sharply, but cost-side prices remain firm. Profit margins at methanol production plants have narrowed, but they are still in a profitable state. Therefore, domestic methanol plant operating rates are likely to remain high in the near term.

Due to the reopening of the Strait of Hormuz, methanol from within the Gulf is gradually flowing out, and imports to China are steadily increasing. However, the increase in circulating volumes is expected to be gradually reflected from mid-July onward. Before that, port methanol circulating volumes are still expected to remain low. Additionally, although international logistics have recovered and historical floating storage and inventories are gradually being shipped to China, some public facilities were damaged during the conflict. It is necessary to monitor the specific recovery situation of international plants and its sustained impact on China's import volumes.

Demand side: Need to watch the impact of downstream profit margins on downstream operating rates

In addition to supply-side changes, the demand side is also a very important focus. Previously, due to high methanol prices, some downstream sectors were loss-making, and overall market buying interest was weak. After the recent methanol price decline, it is necessary to monitor the impact of changes in downstream profit margins on downstream operating rates and buying interest.

III. Summary

Overall, under the influence of changes in the geopolitical situation, the expected shift in supply-demand fundamentals for the domestic methanol market has led to a rapid price decline recently. There may be further weakness going forward. However, attention should be paid to the sustainability of supply replenishment after the price decline and whether the demand side improves, which could provide support for methanol prices.