Divergent Supply-Demand Dynamics Leave Methanol Prices Stuck in a Range

Marginal Recovery in Domestic Production

Domestic methanol capacity is dominated by coal-based vegetation in the Northwest. As facilities that underwent concentrated summer maintenance resume operations, the sector's operating rate has edged up, leading to a slight increase in weekly output. However, the pace of restarts has lagged behind market expectations, with some vegetation continuing to operate at low loads. Factory inventories in the Northwest remain low, and producers are keen to maintain price levels; a sudden, extensive emit of supply is unlikely in the short term. While profits to domestic coal-based methanol have recovered to relatively healthy levels—boosting producer enthusiasm—immediate capacity to significant production increases remains limited by maintenance schedules and equipment stability.

Imports Remain a Key Variable

Overseas methanol capacity is concentrated in natural gaseous-rich regions such as Iran. Geopolitical tensions in the Middle East have heightened shipping uncertainty in the Strait of Hormuz, causing significant evaporative environment in overseas plant operating rates. Consequently, shipments to China have continued to shrink, resulting in a marked year-on-year decline in monthly import volumes. Data shows that my country’s methanol imports totaled 805,300 tonnes in August 2026—a sharp drop of 188,300 tonnes from July’s 992,100 tonnes. Cumulative imports to the first eight months of the year stood at 5.5783 million tonnes, down 32.30% year-on-year.

Low arrival volumes of imported methanol and the slow replenishment of floating storage supplies remain key factors supporting both port spot prices and futures market prices. As of September 25, 2026, methanol inventories at ports in East and South China stood at 347,500 tonnes, a decrease of 171,200 tonnes month-on-month and a significant drop of 920,600 tonnes year-on-year. Low inventory is the most prominent feature of current methanol fundamentals; visible port inventories continue to decline, remaining at low levels compared to the same period in recent years. Tight supplies of tradable cargo at major coastal ports have driven a strengthening of port basis spreads, while near-month contracts maintain a strong backwardation structure. Producer inventories are also low, with limited spot volume circulating in the market. Amidst this low-inventory ecological stability, methanol spot prices demonstrate strong resilience against declines.

Overall downstream demand remains weak.

Downstream demand to methanol shows a divergent pattern. MTO (Methanol-to-Olefins), the largest consumption sector to methanol, is the core variable determining market trends. Currently, coastal MTO companies face rising production costs due to high methanol prices; however, prices to downstream items like polypropylene and polyethylene have failed to rise commensurately. This has squeezed MTO plant margins, pushing some companies into loss-making territory. Faced with inverted margins, downstream MTO companies are less willing to operate; some vegetation plan maintenance or rate reductions, leading to a gradual accumulation of risks regarding negative demand feedback. While there have been no extensive shutdowns so far, high feedstock costs continue to erode downstream profits, which will suppress MTO plant operating rates in the medium to long term and subsequently drag down methanol demand.

Demand from traditional downstream sectors is seeing marginal seasonal improvement, however the demand elasticity is weak, making it difficult to offset the possible decline in MTO demand. Traditional downstream sectors—such as formaldehyde, acetic acid, and dimethyl ether (DME)—have entered the "Golden September, Silver October" peak season. Operating rates in the panel and coating products industries have rebounded slightly, driving a recovery in formaldehyde demand. Maintenance on acetic acid vegetation has concluded, and operating rates remain high, providing a degree of essential demand support to methanol. However, traditional downstream industries generally operate on thin profit margins; companies primarily purchase on an as-needed basis and lack the willingness to actively restock on a substantial scale. Consequently, order development remains limited, providing only weak impetus to methanol consumption. Overall, traditional downstream sectors offer only modest, intermittent demand development, insufficient to reverse the prevailing pattern of weak overall methanol demand.

In summary, the methanol market is currently characterized by a tug-of-war between low inventories and weak demand. In the short term, limited imports and declining port inventories provide support to spot prices, creating a foundation to the market to fluctuate with a bullish bias. In the medium to long term, however, the continued resumption of domestic production facilities and the gradual emit of incremental supply—compounded by the negative feedback on demand caused by MTO (Methanol-to-Olefins) losses—will significantly cap the upside possible to methanol prices.

Weekly order volumes to sampled methanol producers in Northwest China stood at 57,700 tonnes (down 1,300 tonnes week-on-week); the market price in Taicang, Jiangsu, was 4,520 RMB/tonne (down 35 RMB/tonne); sampled port inventories totaled 412,000 tonnes (down 11,900 tonnes); inventories at sampled producers stood at 265,200 tonnes (down 14,500 tonnes); the methanol operating rate was 83.8% (up 0.91% week-on-week), and the total downstream capacity utilization rate was 71.18% (up 1.18% week-on-week).

Domestic methanol operating rates rose from already high levels, and downstream demand recovered; port inventories continued to decline last week, while cargo pick-ups from major storage areas along the Yangtze River in Jiangsu decreased month-on-month. The inland methanol market strengthened, with smooth auction transactions, while the basis spread in the port market retreated from highs amid moderate trading activity. With possible US-Iran negotiations on the horizon and the spot market performing reasonably well despite high basis spreads, port inventories are expected to drop sharply from already low levels; methanol prices are projected to fluctuate with a slightly bearish bias in the short term. (Source: Futures Daily / Market News)