Low Inventory Sustains Methanol Price Fluctuating at Highs
Introduction: Recent significant increases in methanol prices in Jiangsu have widened the price spread between Jiangsu and Guangdong. While Guangdong methanol typically traded at a RMB 20-60/mt premium to Jiangsu for most of this year, the spread has reversed since early June, with Jiangsu methanol now commanding a RMB 100-130/mt premium over Guangdong. This price strength is driven by extremely tight methanol availability in Jiangsu, compounded by multiple unit turnarounds in the Middle East.
Jiangsu Methanol: Structurally Import-Dependent
Jiangsu is a key methanol consumption hub in China, with annual demand reaching 11.7 million mt – accounting for approximately 12% of the nation’s total consumption. However, its local methanol capacity stands at only 3,080kt/a, representing merely 2% of China’s total capacity, making it a structurally supply-deficient market.
Leveraging the Yangtze River Delta’s robust chemical industry and logistics network, Jiangsu has developed an import-oriented methanol ecosystem supplemented by downstream processing industries. On the demand side, major downstream sectors include merchant methanol-to-olefins (MTO), acetic acid, formaldehyde, MTBE, and chloromethanes. Notably, MTO accounts for 55% of Jiangsu's total methanol consumption. Regarding supply, imports constitute over 70% of Jiangsu's methanol sourcing – predominantly from a major Middle Eastern producer. Consequently, concentrated unit turnarounds in this Middle Eastern country would immediately create significant supply shortfalls in Jiangsu, inevitably triggering tight supply and price rallies.
Taicang Inventory Build Underwhelms
Jiangsu's methanol market features active futures and spot trading, with Taicang serving as the primary spot trading hub. Taicang prices are regarded as the regional benchmark for East China, while its inventory levels are closely monitored by market participants.
In H1 2025, Taicang inventory trends largely mirrored overall coastal inventory movements. However, during May-June, Taicang inventory steadily declined. On the one hand, more imported cargoes were directed directly to downstream plants, reducing inflows to public tank farms. On the other hand, persistently low inventories at tank farms in Nantong, Changzhou, Jingjiang, and Zhangjiagang drove concentrated withdrawals from Taicang by midstream and downstream users. Consequently, Taicang inventory failed to accumulate meaningfully. Although inventories in Jiangyin, Taizhou, Jingjiang, and Nanjing rose moderately in June, these were predominantly contracted inventories or downstream plant-held stocks. Compounding the tightness, concentrated ownership of methanol stocks across Taicang's two major storage bases enabled stock holders to actively manage outflows. This forced short-holders to cover positions in the spot market, driving the basis (price spread between spot and futures) to sustained highs above RMB 200/mt.
Near-Term Outlook: Sustained High-Range Consolidation
From late June through month-end, Jiangsu (particularly Taicang) recorded limited methanol import arrivals. Although low-priced cargoes flowed in from inland areas, logistical constraints and freight costs prevented effective supply replenishment in the short term, sustaining tight supply conditions across Jiangsu. On the demand side, widening upstream-downstream price spreads prompted downstream plants to adopt a wait-and-see stance. These plants primarily consumed existing low-cost feedstock inventories. Nevertheless, short-covering expectations persist. Given fundamental supply tightness is unlikely to ease imminently, Jiangsu's methanol market is projected to maintain high-range consolidation in the near term. Key monitoring points include geopolitical developments in the Middle East, downstream profit margins and operation.
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