China Methanol Price Surge on Middle East Supply Disruption Fears
Methanol prices in Taicang surged during a single trading session, driven by market concerns over future import supply disruptions following Israel's military strikes on a certain country in the Middle East. This major event has drawn intense market attention and prompted aggressive positioning by major investors. While the methanol price is expected to sustain high-frequency volatility in the short term, the key question remains: can the upward momentum persist?
I. Analysis of Middle East Event Context
Israel announced precision strikes on multiple military targets within a certain country in the Middle East on June 13, prompting immediate retaliation through drone attacks. This abrupt escalation has ignited bullish sentiment in the methanol market, with investors growing increasingly concerned about further deterioration in the Middle East. The affected country supplies approximately 71% of China’s methanol imports (based on last year's data), making regional stability critical to China’s import supply chain. Any escalation leading to logistics paralysis would inevitably create significant supply gaps for China’s methanol imports, thereby intensifying supply anxiety in the coastal methanol market.
II. Methanol Market Dynamics
Following news of escalating Middle East tensions, methanol futures prices rose significantly. On June 13, the benchmark MA2409 contract settled at RMB 2,389/mt, marking a single-day gain exceeding 4%. Coastal methanol suppliers raised offers accordingly, with Taicang spot methanol closing at RMB 2,465-2,500/mt – a daily increase of RMB 107.5/mt (+4.53%). Prompted by supply shortage concerns for July-August, paper contracts for July-late August deliveries likewise rose approximately 4.7%. The basis also widened substantially.
III. Methanol Operation and Loading Status in a Certain Country in the Middle East
The methanol operating rate in a certain country in the Middle East increased to 72.72% as of June 13, representing a 1.81 percentage point rise from the previous week with corresponding output growth. However, all 11 methanol plants (total capacity 17.16 million mt/a) underwent emergency maintenance shutdowns by June 15 noon. Operations began gradually resuming around 5:30 PM the same day, with the operating rates dropping to 42%-50%. Major ports including Assaluyeh have resumed normal operations, but loading schedules remain constrained due to enhanced port inspections and extended return cycles of vessels.
Shipment data for June 1-14 shows the loading volume of methanol in a certain country in the Middle East totaled only 294kt, down 256kt or 46.55% compared to the same period last month. This suggests June’s total loadings will likely show further monthly contraction. The supply tightening is expected to drive up China’s domestic methanol spot prices and CFR China import prices in the near term. However, should CFR China prices rise sufficiently, non-Iranian suppliers from other Middle Eastern countries, Southeast Asia and South America may return to the Chinese market, greatly compensating for the supply shortfall. Therefore, whether the import supply gap will expand in later months requires further assessment.
IV. Market Outlook
The sudden escalation of tensions in the Middle East has triggered a new upward trend in methanol prices, presenting both opportunities and challenges for investors. Sellers are holding back inventory, reluctant to sell at current levels. Buyers remain cautious, adopting a “wait-and-see” approach with limited transactions. Traders show weak holding sentiment, preferring quick turnover to mitigate risks.
On the demand side, key downstream plants have stocked feedstock through late July/early August, while traditional downstream industries have entered their seasonal demand lull. With feedstock inventories at medium-to-high levels, downstream purchasing enthusiasm has declined. On the supply side, public storage tank farms in Guangdong, Jiangsu, and other regions have seen increased arrivals. Major downstream plants are also receiving concentrated shipments. The arbitrage window between inland and coastal markets has opened, allowing low-cost inland supplies to gradually flow into coastal areas. Coastal methanol inventories are expected to be stable-to-rising. On the cost side, recent coal prices remain stable. Although summer peak demand may improve with rising temperatures, downstream users continue to purchase only for essential needs, limiting additional demand. As a result, coal prices may provide insufficient cost support for methanol prices.
In the short term, methanol prices may maintain a steady uptrend, but weak end-user consumption and downstream demand will likely cap the upside potential. Over the medium to long term, the prices are more likely to stabilize or retreat. It is still needed to pay close attention to the loading operations at Assaluyeh Port and the shipping conditions in the Strait of Hormuz.
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