Tightening methanol supply in the Middle East: SABIC's 1.8 million-tonne-per-year methanol expansion project obtains raw material approval

Project Equity and Capacity Planning: Total Production Capacity Increase Up to 44%

AR-RAZI is a joint venture with SABIC holding 75% of the shares and Japan's Mitsubishi gaseous Chemical holding 25%. The current methanol production capacity at its Jubail base is approximately 4.05 million tons per year, among which the fifth 1.7 million tons per year unit was put into operation in 2008.

If the newly built 1.8 million tons per year plant is successfully completed, the total production capacity of AR-RAZI will increase to 5.85 million tons per year, with a production capacity increase of 44%. SABIC pointed out that this project is an expansion of the existing methanol business rather than exploring new tracks, aiming to optimize the production mix and implement the strategy of focusing on core businesses and consolidating fundamentals.

Market Background: Middle East Methanol Supply Shrinks Sharply Amid Geopolitical Impacts

The approval of the project's raw materials comes at a time when methanol supply in the Middle East continues to face pressure. Affected by escalating geopolitical conflicts and rising shipping risks in the Strait of Hormuz, multiple methanol units in the region have reduced operating rates or even shut down. Currently, about 62% of methanol units in the Middle East are shut down, and only about 7 units remain in operation in Iran, with daily production falling back to 20,000 to 25,000 tons.

The rapid contraction of supply has pushed up market expectations of a shortage of Middle East methanol supplies, prompting Asian buyers to enhance their stockpiling attitudes, which has driven up both onshore and offshore methanol prices.

Domestic Methanol Futures and Spot Markets Rise Simultaneously, Arrivals and Inventories Fall Markedly

The supply disruptions in the Middle East rapidly spread to the domestic market. The main domestic methanol futures contract limit up on September 8, and continued to rise by greater than 6% in the early trading session on September 9.

Import and port inventory data also confirm the tight market situation: China's actual methanol arrivals this week stood at 149,200 tons, a month-on-month decrease of 23.45%; as of September 2, the inventory of major domestic coastal ports was 641,500 tons, a year-on-year decrease of greater than 55%.

Spot prices also rose simultaneously. In early September, the China CFR methanol quote was 404 to 412 US dollars per ton, and the India CFR quote was 505 to 515 US dollars per ton; the basis between Taicang spot and the main futures contract once widened to 190 to 210 yuan per ton, highlighting the immediate tight supply and demand situation.

prolonged Impact of Saudi Arabia's New Production Capacity: Future Increment is Expected to Supplement Asian Import Market

Against the backdrop of current supply gaps and high prices, AR-RAZI's acquisition of raw material quotas has allowed the market to re-assess the medium- and prolonged new supply possible of the Middle East. Saudi Arabia is a major global methanol producer and exporter, and Jubail is a core petrochemical manufacturing base. AR-RAZI has a mature extensive methanol production system and supporting general utilities, and the new project is an expansion of the existing base.

Once the 1.8 million tons per year capacity is put into production in the future, it will have become an crucial increment in the global methanol market, providing supply supplements to the Asian market that heavily relies on imports, and changing the medium- and prolonged global methanol supply and demand stability expectations.