【Lead-in】: Port methanol inventories have recently declined to low levels, with expectations of a further drop potentially breaking historical lows. As market tradable volumes tighten, the coastal methanol market has generally trended upward amid volatility.
1. Brief Analysis of Coastal Methanol Prices
The supply tightness in the coastal methanol market has become increasingly pronounced recently, driving sustained price increases. Regionally, during early-to-mid September, South China faced insufficient methanol supply. Holders limited sales volumes while steady demand consumption continued, causing basis strength to surge and widening the price gap with East China rapidly. Attracted by high prices, some foreign vessels diverted their discharge plans to South China. Although port arrivals later in the month slightly increased tradable volumes and caused the basis to soften—narrowing the price gap with East China—the overall supply remained at low levels. Consequently, replenishment was limited, and prices largely maintained high-level operations.
In the East China methanol market, recent foreign vessel discharges were primarily directed to mainstream storage areas. Domestic trade and road transport supplemented inland sources to peripheral warehouses, but these supplies mostly catered to downstream guaranteed contracts, leaving tradable market volumes low. Despite brief price declines due to macroeconomic fluctuations, the overall coastal methanol price trend remained one of volatile growth.
Future trends in coastal methanol prices will primarily depend on changes in supply-side dynamics.
2. Import Supply
During the reporting period, import supply rose week-over-week but fell significantly year-on-year compared to the same period last year. Additionally, some volumes entered non-public downstream storage areas, causing port methanol inventories to continue declining.
Looking ahead, near-term import supply remains persistently low. With ongoing essential consumption by downstream users, port inventories are expected to fall further, potentially breaking below historical lows again. The key factor influencing import volumes is the passage status through the Strait of Hormuz; therefore, geopolitical tensions remain a critical focus for the methanol market.
3. Domestic Supply
Domestic supply supplements the coastal methanol market through two main channels: standard domestic trade from regions such as Southwest China, and supplementary volumes via road and water transport once arbitrage opportunities between inland and coastal markets open up.
As shown in Figure 3, by mid-to-late September, the restart of domestic methanol plants alleviated expectations of inland supply tightness. Inland prices struggled to follow suit, leading to a rapid expansion of the price gap between ports and inland areas, thereby opening arbitrage opportunities from inland to coastal markets.
However, actual flow data indicates that supplementary volumes from inland to coastal markets increased very little despite the opened arbitrage window. This is primarily attributed to insufficient road transport capacity around holiday periods. Even though arbitrage opportunities existed, logistical constraints, combined with recovered inland supply prioritizing downstream contract fulfillment, resulted in extremely limited tradable volumes flowing from inland to coastal markets.
4. Summary
Supply-side factors have been the primary drivers of recent coastal methanol market trends. Geopolitical tensions and domestic transport capacity issues have created supply tightness, pushing prices strongly higher. Going forward, watch points include:
Thus, the supply side remains the dominant influence on the coastal methanol market in the near term. The domestic methanol market is expected to maintain its strong momentum.
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