Article Summary: Based on current discharge progress of methanol vessels from abroad, import supply estimates for May are maintained at 315,700 tonnes. Total exports in May are not expected to decline sequentially from April, with forecasts remaining above 200,000 tonnes. Following the outbreak of conflict, major coastal end-users and suppliers purchased domestic cargoes in advance, contributing to the less-than-expected destocking amid low imports and high exports.

Currently, production area inventories have dropped to historically low levels. While there may still be room for further decline, demand has essentially bottomed out. Fortunately, the main production regions have seen numerous planned and unplanned plant shutdowns recently. This, combined with ongoing domestic export negotiations and continuous coastal arbitrage activities, coupled with a shortage of transport vehicles under the backdrop of high oil prices, has strengthened the inland market this week with price rebounds. Additionally, macro-level disturbances have exerted periodic pressure on the main contract, leading to a low-level recovery in the June-September spread.

Although US-Iran negotiations remain uncertain, there has been a notable increase in vessels carrying other products departing from the Strait of Hormuz this week, supporting Iranian producers' expectations that peace may be imminent. Numerous plants were expected to restart during the week, but most factory tenders continued FOB negotiations. Freight capacity may remain tight, and some oil tankers, due to prolonged stays during the war period, are in poor condition, affecting sailing speeds.

As of now, the main Middle East production region may have loaded 208,000 tonnes of cargo destined for China this month, with assessments indicating plans for additional loading in late May or early June. Regarding non-Iranian sources, June arrivals are expected to be roughly flat compared to May. Therefore, the comprehensive estimate for June methanol import supply remains between 500,000 and 550,000 tonnes. If loading and transit remain problematic over the next two weeks, the forecast will be adjusted. It is worth noting that under the backdrop of high energy prices, one must be cautious about the potential for a significant rebound in non-Iranian supply to China in the second half of the year due to sluggish overseas demand. This scenario occurred in 2023 and 2025, but not in 2024, primarily due to supply-side issues.

On the demand side, performance varied across products. Centralized restocking by northern downstream formaldehyde buyers ignited demand, leading to a sudden supply shortage in some production areas. Prices rose significantly this week, and operating rates are expected to rebound from lows. Although acetic acid continues to incur losses, some major plants are concluding maintenance or planning restarts, so operating rates are also expected to recover. The fact that some methanol plants, which previously served as supporting units upstream of acetic acid, sold methanol externally to the coast was a significant factor contributing to coastal methanol destocking falling short of expectations. The MTO plant in Lianyungang has shut down, and the cessation of its domestic long-term contracts will exert increased pressure on inland markets. This was a key rationale for inland traders' earlier bearish positions. Profit margins for butanol and octanol have dropped significantly in the past two weeks, warranting close attention to potential operating rate changes at MTO plants with butanol/octanol downstream units. While MTBE margins remain acceptable, exports continue to be weak, suggesting there is still room for operating rates to decline further.

In summary, although methanol is still in the off-season, weak demand and MTO plant shutdowns may have already been priced in previously. However, import issues mean the national methanol market remains in a destocking phase. Despite macro-level disturbances, methanol's fundamentals continue to show relative strength. Industry participants are advised to operate cautiously.