The global methanol market has witnessed a dramatic V-shaped rebound in recent trading, reversing mid-week declines to post strong gains driven by a confluence of geopolitical uncertainty in the Middle East, extreme cold weather disrupting North American energy supplies, and a broad rally across the chemical commodity sector. What began as a fundamental-driven slump—weighed down by high port inventories and weak downstream demand—shifted course in the latter half of the week as short sellers covered positions, overseas energy prices spiked, and renewed fears of supply contractions took hold. This analysis breaks down the key supply, demand, inventory, and macroeconomic factors behind methanol’s price surge, and outlines the short and medium-term outlook for this critical industrial feedstock.
Supply Side: Mild Domestic Contraction, Overseas Supply Risks Emerge as Bullish Catalyst
Methanol supply dynamics are split between a slightly tightened domestic market and significant overseas supply disruptions, with the latter emerging as the core driver of bullish sentiment in the global market.
Domestically, methanol production saw a modest contraction last week, with the national plant capacity utilization rate falling 1.18 percentage points week-on-week to 89.92%, and weekly output declining 26,500 tons to 2.0089 million tons—though output remains 66,900 tons higher year-on-year, keeping overall supply at a high level. By production process, coal-based methanol output dropped 28,500 tons week-on-week to 1.5073 million tons due to temporary plant maintenance, while coke oven gas-based production fell 3,200 tons to 192,000 tons, pressured by widening losses for coke producers amid rising coking coal prices. Natural gas-based methanol in the southwest saw a slight recovery (up 4,000 tons week-on-week) on eased gas supply, and coal-to-methanol production remained stable. Regionally, operating rates fell across Northwest, North, and Central China, with only the Southwest posting gains. With few new maintenance plans on the horizon, domestic production is expected to stay elevated in the near term.
Overseas, the market is dominated by supply risks centered on Iran—China’s top methanol import source. Iran’s winter gas rationing period has forced the shutdown of multiple methanol plants with a combined annual capacity of nearly 14 million tons, leaving only FPC, KPC, and Bushehr facilities operational. This has triggered expectations of a sharp drop in China’s methanol imports from Iran in January, a core bullish factor supporting global prices. While overseas methanol plant operating rates edged up 1.36 percentage points week-on-week to 60.78% (weekly output 886,600 tons), growth was concentrated in non-Iranian regions, doing little to offset Middle East supply curtailments. Geopolitical tensions in Iran have further amplified volatility: no substantive supply disruption has occurred yet, but speculative trading has heightened concerns over the stability of Iran’s methanol production and exports. A clear futures market divergence has emerged, with near-month contracts weak on high inventories and weak demand, while far-month contracts trade at a significant premium on supply contraction expectations.
Demand Side: Off-Season Weakness Persists, Cost Pressures Weigh on Key Downstream Sectors
Methanol demand remains in a seasonal slump, with the core methanol-to-olefins (MTO) sector under pressure from eroded profitability, and marginal improvements in traditional downstream failing to provide meaningful market support.
The MTO sector—methanol’s largest consumer—saw a notable drop in activity, with capacity utilization falling 1.48 percentage points week-on-week to 84.29%. Prior methanol price hikes squeezed MTO margins, prompting some units to cut operating rates to control costs, while high downstream polyolefin inventories and unimproved end-user demand further constrained production. Two major MTO facilities (Zhejiang Xingxing, Jiangsu Sirbang) shut down last week, and the restart of Ningbo Fude remains uncertain. A glimmer of relief comes from the recent rebound in polyolefin prices amid the chemical sector rally, which may ease cost pressures for MTO units in the short term.
Traditional downstream sectors posted modest month-on-month improvements but remained weak year-on-year, with structural headwinds persisting:
• Glacial acetic acid: Capacity utilization rose 2.27 percentage points month-on-month (driven by mild ethyl acetate demand recovery) but was 7.55 percentage points lower year-on-year.
• Dimethyl ether (DME): Operating rates remained at a low 5.33% (up 1.53 percentage points month-on-month, down 2.3% year-on-year) due to liquefied petroleum gas price fluctuations.
• Formaldehyde: A slight 0.28 percentage point month-on-month rise to 35.68% (up 5.8% year-on-year) on pre-Spring Festival stockpiling in the real estate sector.
• MTBE (Shandong): The strongest performer, with utilization at 68.01% (up 0.44% month-on-month, 12.74% year-on-year) on steady gasoline demand recovery.
Overall, the marginal upticks in traditional downstream demand are too weak to counterbalance the slump in MTO activity, leaving the broader methanol demand landscape fundamentally soft.
Inventory: Historically High Levels Persist, Port Destocking Lags Expectations
Methanol inventory remains a key bearish factor, with social stocks at historically elevated levels for this time of year and port destocking proceeding slower than anticipated, exerting persistent downward pressure on spot prices.
Domestic methanol social inventory rose 9,700 tons week-on-week to 1.8959 million tons—an astonishing 666,600 tons higher year-on-year, remaining at a historical high. Port inventory, the biggest pain point, increased 22,200 tons week-on-week to 1.4575 million tons (527,800 tons higher year-on-year); despite strong import reduction expectations, the market is still digesting previously arrived cargoes, leading to a slower-than-expected destocking pace. Manufacturer inventory saw a slight 12,500 ton decline to 438,400 tons (still 138,900 tons higher year-on-year), as inland producers cut prices and ran promotions to reduce stock amid falling market prices. Downstream inventory rose 20,400 tons month-on-month to 192,400 tons on small-scale pre-Spring Festival restocking, but the move was cautious with no large-scale stockpiling, reflecting weak market confidence. The overall oversupply situation remains unchanged, with high inventories acting as a critical ceiling for near-term price gains.
Cost Side: Widespread Profit Pressures, Raw Material Costs Provide a Downside Floor
Methanol producers across all production routes are grappling with shrinking profits or widening losses, while raw material coal and natural gas prices show limited downside potential, providing a critical cost floor for methanol prices despite the profitability squeeze.
Profitability deteriorated across the board last week: coal-based methanol saw lower costs on falling coal prices, but regional spot price differentiation compressed margins further, leaving most enterprises in the red; natural gas-based methanol in Sichuan-Chongqing saw wider losses on spot price declines; coke oven gas-based methanol profits contracted due to weak regional demand and falling methanol prices.
On the raw material front, coal prices continued to decline but with a narrowing fall, as downstream buyers only purchased small volumes for immediate needs, leading to stagnant transactions. Coal mine capacity utilization fell 1 percentage point month-on-month to 89.6%, with daily output down 57,000 tons, as some private mines suspended production for the Spring Festival and state-owned mines cut output on low targets. While coal demand remains weak (warmer-than-usual winter curbing power plant consumption, building materials in off-peak production), downside potential is limited: Spring Festival-driven mine production cuts will accelerate in February, and essential demand from coal chemical enterprises provides baseline support. Natural gas prices were stable domestically, leaving Chongqing’s natural gas-based methanol production costs unchanged, but overseas natural gas prices spiked sharply due to the North American cold wave. This pushed up global light hydrocarbon product prices, creating a ripple effect and sentiment support for the domestic methanol market.
Macroeconomic & Sector Sentiment: Chemical Rally Boosts Risk Appetite, Spills Over to Methanol
Methanol’s price rebound was significantly amplified by a broad, strong rally in the domestic chemical sector, driven by improved macroeconomic sentiment, cost-driven global energy price hikes, and expectations of industry profit recovery in 2026.
Olefins, aromatics, and oil products all posted sharp gains last week, with core drivers including the North American cold wave’s impact on overseas energy prices (pushing up ethylene, propane, and other product prices), a solid domestic economic recovery (2025 GDP growth projected at 5%, December manufacturing PMI at 50.1% indicating expansion), and the chemical industry’s gradual supply-demand rebalancing after years of capacity expansion curbs. The equity market’s bullish sentiment for the chemical sector—fueled by expectations of 2026 profit recovery—spilled over to commodity markets, boosting investor risk appetite for methanol. Additionally, Middle East geopolitical instability raised concerns over global energy and chemical supply, further stoking bullish sentiment across the board.
Notably, there was divergence within the chemical sector: aromatics led the gains, while coal chemical products like methanol lagged. This gap was driven by methanol’s weak fundamentals—high inventories and soft downstream demand suppressed price gains, making it a relative underperformer. Even so, the overall strength of the chemical sector provided critical sentiment support for methanol, offsetting the downward pressure from weak fundamentals and driving a sharp rebound in futures prices.
Market Outlook: Fluctuating Uptrend in the Short Term, Upside Capped by Weak Fundamentals
The methanol market is currently caught in a tug-of-war between strong bullish expectations (Iranian supply curtailments, North American cold wave, chemical sector rally) and weak fundamental reality (high inventories, soft downstream demand, ample domestic supply)—a dynamic that will shape price movements in the short and medium term.
Short-Term Outlook (1-4 Weeks)
Methanol prices are expected to maintain a fluctuating upward trend, with futures prices potentially testing the 2350–2400 yuan/ton range. Bullish drivers will remain anchored by Iranian import reduction expectations, overseas energy price support, and continued sentiment spillover from the chemical sector. However, the upside will be strictly limited by persistent fundamental headwinds: ample inland supply, slow port destocking, and weak downstream demand validation. Regional differentiation will also persist, with port markets outperforming inland markets on import optimism. Key factors to monitor include Middle East geopolitical developments and chemical sector sentiment—any retreat in bullish sentiment or easing of tensions in Iran could see the market shift back to fundamental, demand-driven trading.
Medium-Term Outlook (Post-Spring Festival)
Uncertainties remain high, and the outlook hinges on a sustained recovery in downstream demand and a material improvement in the supply-demand and inventory balance. Prices are expected to strengthen further if: post-holiday downstream MTO and traditional sectors see a meaningful rebound in operating rates; Iranian imports continue to decline; and domestic methanol plants enter spring maintenance, leading to a reduction in supply and accelerated destocking. Conversely, if downstream demand recovery is sluggish and inventories remain high, the market will face renewed downward pressure, even with import support.
Key Takeaways for Market Stakeholders
For methanol producers, traders, and downstream buyers, navigating the current market requires balancing bullish sentiment with fundamental caution, with clear strategies for each segment:
• Producers: Capitalize on short-term price strength to optimize inventory levels, while remaining mindful of the high inventory ceiling and limited upside; align production plans with upcoming spring maintenance schedules to leverage potential supply tightness.
• Traders: Focus on port market opportunities driven by import reduction expectations, and exercise caution in inland markets amid ample supply and weak demand; monitor geopolitical developments and chemical sector sentiment for timely position adjustments.
• Downstream Buyers: Conduct cautious, small-scale pre-Spring Festival restocking for essential demand, and avoid large-scale inventory buildup given the uncertain outlook; leverage short-term price fluctuations to lock in costs for near-term production needs, and track MTO profitability and polyolefin demand for signals of a sustained market rebound.
In summary, methanol’s sharp rebound is a sentiment-driven move against a backdrop of weak underlying fundamentals. While geopolitical and weather-related bullish factors will provide short-term support, the market’s long-term recovery will ultimately depend on a tangible improvement in downstream demand and a resolution of the persistent inventory overhang—making post-Spring Festival demand trends the single most critical factor for the methanol industry in 2026.
