China Methanol Market Poised for a Rebound

On the supply side, the July methanol market displayed a divergent pattern: domestic production contracted while imports surged, leading to a steady rise in total supply and exacerbating the market's loose supply-demand stability. Influenced by concentrated plant maintenance and temporary shutdowns due to technical issues, the sector's operating rate continued to decline, resulting in a slight contraction in monthly output. Data indicates that domestic methanol production in July totaled 8.57 million tonnes, a month-on-month decrease of 201,700 tonnes (2.30%); the average capacity utilization rate fell to 85.82%, down 5.11 percentage points from the previous month. Twenty-nine methanol units underwent maintenance in July—an increase of 16 units compared to June—resulting in a production loss of 1.4165 million tonnes, a month-on-month rise of approximately 54%. Imports were the primary driver of the increased supply; following the temporary resumption of shipping through the Strait of Hormuz, a substantial volume of cargoes from the Middle East arrived at ports. In July, methanol imports surged to 994,500 tonnes—a month-on-month increase of 113.50%—reversing the direction of low import volumes seen previously. Total methanol supply to the month reached 9.5645 million tonnes, up 3.54% month-on-month, laying the groundwork to inventory accumulation in the market.

On the demand side, the characteristics of the off-season were pronounced; essential downstream demand was weak, with only a few product categories seeing a localized recovery in demand driven by margin improvements. Most downstream methanol industries entered their traditional off-season in July, with operating rates declining across the board, thereby dragging down overall consumption. The operating rate of the key MTO (Methanol-to-Olefins) sector fell to 80.60%—dropping both month-on-month and year-on-year—as multiple MTO units (including those at Nanjing Chengzhi and Xinjiang Hengyou) shut down, causing demand to externally sourced methanol to contract sharply. Operating rates in the formaldehyde, dimethyl ether (DME), and MTBE (methyl tert-butyl ether) sectors fell by 7.96, 4.19, and 10.49 percentage points respectively, as essential demand from traditional downstream sectors failed to keep pace. Downstream methanol consumption in July totaled 9.3895 million tonnes, a marginal month-on-month increase of 0.81%; the rate of demand development lagged far behind that of supply. However, thanks to a sharp drop in methanol feedstock prices, margins across the downstream sector chain saw a structural recovery. Profits to glacial acetic acid, formaldehyde, and MTBE improved significantly month-on-month, with MTBE profits surging by 367.65%. This alleviated some of the pressure from contracting demand and supported market resilience at the low end, preventing a steep, one-sided price collapse.

Regarding inventory, pressure mounted significantly in July. while producer inventories dipped slightly to 362,500 tonnes (a 1.41% month-on-month decline), port inventories climbed sharply; by month-end, port stocks reached 686,800 tonnes—an increase of 126,500 tonnes or 22.58% month-on-month. A levels of imported cargoes arriving in late July, combined with weak downstream willingness to take delivery, resulted in a noticeable buildup of stock at ports. In terms of profitability, methanol producers relying on coal and natural gaseous fell into widespread losses in July, further exacerbating the sector's plight. Calculations indicate that the theoretical profit to coal-based methanol in Northwest China stood at -55.98 RMB/tonne (down 119.77% month-on-month), while natural gaseous-based methanol in Southwest China recorded a theoretical profit of -115.71 RMB/tonne (down 144.67% month-on-month). Weakening cost support, combined with mounting production pressures on companies, has fueled persistent market caution. Meanwhile, methanol maintains a strong correlation with downstream items such as glacial acetic acid and formaldehyde; the sluggish performance of these downstream sectors during the off-season has transmitted downward pressure to the upstream market, limiting the scope to a price rebound.

The methanol market in August is expected to see a pattern of slowing supply development and steady demand recovery, with prices likely entering a phase of evaporative correction. On the supply side, domestic production units undergoing maintenance are set to restart en masse in August; output is projected to rebound to 8.99 million tonnes, a month-on-month increase of 4.90%. However, based on current shipping schedules, methanol imports are expected to fall back to 777,200 tonnes, suggesting an overall slowdown in the rate of supply development. On the demand side, operating rates to most downstream units are expected to rise, and profitability in the formaldehyde, glacial acetic acid, and MTBE sectors continues to recover, gradually strengthening the support from essential demand. Monthly consumption is projected to grow steadily, with the rate of demand development likely to outpace that of supply. While inventory levels remain on an upward trajectory, the pace of accumulation is expected to slow. Overall, the methanol market is likely to exhibit a direction of evaporative upward movement in August; key factors to monitor include US-Iran geopolitical tensions, the progress of unit maintenance and restarts, and downstream operating rates. (Source: Futures Daily)