Supply Shrinkage Coupled with Cost Backing-Methanol Maintains a Bullish Trend

At the end of February, affected by the Spring Festival holiday and weak demand, the main contract price of methanol was trading at a low level around 2200 yuan/ton. After entering March, due to the geopolitical conflict and the blockage of the Strait of Hormuz, the expected supply of methanol imports from overseas was greatly reduced, and combined with the cost support from the rise in crude oil prices, the methanol futures price began to rise and maintained a high-level range fluctuation from April to might 25.

China is the world's largest methanol producer, with a production capacity accounting to about 60% of the global total, and it is also a net importer of methanol, with an import application of about 13%.

Data show that in 2025, China's methanol production is about 101.88 million tons to the whole year, an increase of 10.8% year-on-year, with an average monthly production of 8.4896 million tons. From January to April this year, China's methanol production is 35.0645 million tons, an increase of 2.04 million tons year-on-year, an increase of 6.2%. Among them, the production in March is 9.039 million tons, and the production in April is 8.764 million tons, an increase of 4.7% year-on-year. As of might 22, the weekly production of methanol is 2.009 million tons, an increase of 54,000 tons compared to the previous week, an increase of 2.8%, an increase of 3.0% compared to the weekly average production of 1.951 million tons last year. During the same period, the national methanol capacity utilization rate is 89.33%. Breaking down by process, the capacity utilization rates of coal-coated methanol, coal-single methanol, electric furnace off-gaseous, coke oven gaseous, hydrogenation of carbon dioxide and natural gaseous methanol are 76.19%, 98.66%, 57.91%, 66.85%, 49.16% and 69.48%, respectively. Only the coal-single methanol process is close to full production.

Throughout 2025, China's methanol import volume reached 14.4054 million tons, a year-on-year increase of 6.8%; the export volume was 2.925 million tons, a year-on-year increase of 86%; the net import volume was 14.113 million tons, a year-on-year increase of 5.9%. After the Middle East situation escalated on February 28 this year, China's net import volume of methanol has significantly declined, dropping to 3.72 million tons and 3.897 million tons in March and April, respectively, about 800,000 tons less than the monthly average. China's coastal market MTO devices are highly dependent on imported methanol, and imported methanol accounts to 70%-80% of the consumption of the mainstream MTO devices at ports. Once the import volume drops significantly, the methanol inventory at ports will continue to decline, and the MTO devices will face a raw material gap, which might force them to shut down.

The apparent demand (production + net import) of methanol in April was 9.2025 million tons, an increase of 102,000 tons year-on-year, a development rate of 1.1%. The cumulative apparent demand from January to April was 38.848 million tons, an increase of 2.079 million tons year-on-year, a development rate of 5.7%, which is an increase of about 5.2 million tons per month.

Due to the significant decrease in methanol imports since March, the total domestic methanol inventory has rapidly declined. However, as the inventory at the beginning of the year was at a high level, as of might 22nd, the total methanol inventory is still 31% higher than the same period last year. During the same period, the inventory of methanol production companies is 364,200 tons, an increase of 28,200 tons compared to the same period last year, an increase of 8.4%, and basically unchanged on a weekly basis. The social inventory of methanol is 1,079,700 tons, an increase of 253,300 tons compared to the same period last year, an increase of 30.7%, and a decrease of 81,000 tons on a weekly basis, a decrease of 7%. During the same period, the port inventory is 715,500 tons, which is still 15.9% higher than the same period last year, however the weekly decrease reaches 10.2%. It is expected that the methanol import volume in might will still maintain at a low level below 500,000 tons. If the import remains at a low level, the domestic port inventory might decrease to below 400,000 tons in the middle and late June, and at that time, the port MTO device will face the risk of raw material shortage, and it is expected that the methanol price will be strong.

What needs to be watched in the later period is that if the situation in the Middle East eases, the net import of methanol in June is expected to recover to greater than 8 million tons, and the domestic supply will turn to be loose, at which time the methanol price will be under pressure.