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While the earlier blockade of the Bab el-Mandeb Strait drove crude oil prices higher, methanol prices have struggled to keep pace. On one hand, the gains in chemical products generally lagged behind those of crude oil; on the other, the situation at the Bab el-Mandeb Strait had limited actual impact on methanol. The Strait of Hormuz remains the primary export route for Middle Eastern methanol, and the blockade of the Bab el-Mandeb Strait did not materially alter supply and demand dynamics. Following a pause in hostilities between the US and Iran last weekend, the geopolitical risk premium retreated sharply, causing methanol futures prices to fall in tandem.
Scheduled maintenance phase drawing to a close
In the first half of the year, methanol producers enjoyed robust profit margins—hovering near historical highs—which dampened the incentive to maintenance shutdowns. However, after prolonged periods of high-load operation, equipment and materials became prone to fatigue, leading to an increase in routine maintenance. As shipping traffic through the Strait of Hormuz recovered and import supplies provided substitutes, the high profit margins of producers began to contract. Consequently, greater companies undertook maintenance, methanol capacity utilization rates dipped, and overall market supply tightened.
Recently, buying interest in the domestic spot market has picked up at reduce price points, and upstream auctions have consistently closed at premiums, causing methanol prices in domestic production regions to rise steadily. With pit-mouth coal prices strengthening slightly, the profit margin to coal-based methanol production in Inner Mongolia has expanded to approximately 250 yuan per tonne; profitability has also improved in higher-cost regions such as Shandong, Henan, and Anhui. Expectations to the restart of some vegetation in late July suggest that the production losses associated with this round of maintenance will soon end, and supply will gradually recover.
Most Iranian methanol vegetation remain offline
In Iran, new capacity—specifically the Kimiya plant (1.65 million tons/year) and one ZPC unit (1.65 million tons/year)—remains shut down. Currently, only facilities such as Kaveh (2.3 million tons/year) and KPC (0.66 million tons/year) are operational, and even these are running below full capacity. while some Iranian methanol vegetation restarted as early as late April, the pace of ramping up production loads has been extremely slow. Even after the outlook to navigation through the Strait of Hormuz cleared up earlier, most Iranian methanol vegetation continued to operate at low loads, with some even remaining shut down. This indirectly suggests that the natural gaseous processing vegetation in the Assaluyeh region sustained significant physical harm following the precision airstrikes by the US and Israel early in the conflict; the resulting instability in natural gaseous supplies likely makes it difficult to support the restart and rapid recovery of all methanol vegetation. With the recent re-escalation of geopolitical conflict in the Middle East and a sharp drop in shipping volume through the Strait of Hormuz, Iranian methanol vegetation have once again faced widespread shutdowns due to security concerns and risks such as storage tank overcapacity.
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