SunSirs: Methanol: Correction from Highs, Driven by Both Cost and Supply-Demand Factors

Since the outbreak of the U.S.-Iran conflict, domestic port inventories of methanol have fallen rapidly. As of April 2, domestic port inventories stood at 707,600 metric tons, down 267,700 metric tons from the level prior to the conflict on February 26, representing a decline of 27.45%. Specifically, methanol port inventories in East China stood at 451,600 metric tons, down 130,300 metric tons from February 26, representing a 22.39% decline; while in South China, inventories were 256,000 metric tons, down 137,400 metric tons from February 26, marking a 26.77% decrease.

Recently, the domestic methanol market has experienced significant volatility within a high-price range, with spot prices showing a noticeable correction over the past two days, primarily driven by three factors: weakening raw material prices, increased supply, and sluggish demand. Based on Business Society’s latest benchmark price, this report provides a comprehensive analysis of the spot market dynamics, price fluctuation logic, and market trends over the past two days.

I. Spot Price Dynamics Over the Past Two Days (April 12–13)

According to SunSirs data, the methanol benchmark price was 3,353.33 RMB/ton on April 12 and fell to 3,320.00 RMB/ton on April 13, representing a cumulative decline of 1.01% over the two days. Prices retreated slightly from their highs, market trading activity slowed, and the overall market exhibited a volatile yet weak trend.

II. Analysis of Core Factors Behind Price Fluctuations

1. Cost Side: Weakening Raw Materials, Diminished Support

Methanol costs are primarily driven by thermal coal (today’s SunSirs benchmark price: 876.67 RMB/ton) and natural gas (today’s SunSirs benchmark price: 3,680.00 RMB/ton). The recent weakness in the raw material market has directly dragged down methanol prices. Thermal coal prices have corrected slightly, and with ample market supply, cost pressures for coal-to-methanol production have eased; Natural gas prices have remained stable but lack upward momentum. As the overall cost center for raw materials shifts downward, support for methanol prices has noticeably weakened.

2. Supply Side: Increased Domestic Production + Import Expectations, Supply Tending Toward Abundance

Domestic methanol plant operating rates have rebounded, with previously idled facilities gradually resuming production. Weekly average output has remained above 1.6 million tons, increasing supply in the mainland market. Meanwhile, the easing of geopolitical tensions in the Middle East has allowed Iranian methanol plants to gradually resume operations, and the resumption of navigation through the Strait of Hormuz is expected to boost methanol import arrivals in April. Port inventories have stopped declining and are rebounding; inventories at East China ports have increased from 826,800 metric tons to 873,200 metric tons, shifting the supply situation from tight to balanced and ample.

3. Demand Side: High Prices Dampen Essential Demand, Slowing Downstream Purchases

In traditional methanol downstream sectors—formaldehyde (today’s SunSirs benchmark price: 2,966.67 RMB/ton), acetic acid (today’s SunSirs benchmark price: 5,333.33 RMB/ton), and dimethyl ether (today’s SunSirs benchmark price: 4,650.00 RMB/ton) have maintained low operating rates. Resistance to high methanol prices has intensified, with procurement limited to small orders for essential needs and no concentrated restocking activity. Emerging demand: Although MTO plants maintained high operating rates, profit margins were squeezed, leading to reduced purchasing enthusiasm. Overall demand failed to keep pace, making it difficult to sustain high methanol prices.

III. Market Outlook

In the short term, the methanol market is expected to remain at elevated levels with a slightly bearish trend. Although input costs have weakened, thermal coal and natural gas prices remain relatively high, providing a floor for methanol prices. On the supply side, both domestic and imported volumes are limited, and inventories are within a reasonable range, reducing the pressure for significant stockpiling. On the demand side, essential demand remains stable, and traditional downstream sectors are gradually recovering, limiting the scope for price corrections.

In the medium term, if the situation in the Middle East continues to ease and imported supplies steadily return, coupled with domestic plants operating at full capacity, supply-side pressure will gradually emerge. If downstream demand remains sluggish and high prices fail to be effectively passed on, methanol prices may correct further, but overall, they will likely fluctuate within a narrow range of 3,200–3,400 RMB per ton.

IV. Summary

The recent two-day pullback in methanol spot prices is the result of a combination of weakening cost support, ample supply, and sluggish demand. The market is currently in a phase of high-level consolidation, with heightened price volatility. Moving forward, key factors to monitor include raw material price trends, the pace of import arrivals, and the recovery of downstream demand. In the short term, the market is expected to trade sideways with limited downside potential, while the medium-term outlook will depend on the rebalancing of the supply-demand dynamics and the pace of changes on the cost side.

Looking ahead, on the one hand, Iran is China’s largest source of methanol imports, and the political turmoil there directly impacts domestic methanol imports; on the other hand, the instability in Iran is affecting the global methanol supply-demand dynamics, prompting some international buyers to shift their procurement to China. This is also a key reason for the outflow of methanol from ports and the accelerated decline in inventories.

In summary, the turmoil in Iran has significantly impacted the domestic methanol supply-demand dynamics. It has not only affected domestic methanol imports but also driven up chemical product prices, thereby improving profits for downstream methanol enterprises. The methanol industry chain is showing a phased improvement, supporting stronger methanol prices. Although the U.S. and Iran have recently initiated negotiations, the process has been rocky, and the positive geopolitical impact on the methanol market has not dissipated. Consequently, methanol prices are expected to remain relatively firm in the near term.

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