Domestic methanol and derivatives markets face pressure due to limited supply of 20 million tons per year.

Domestic methanol and derivatives markets face pressure due to limited supply of 20 million tons per year.

2026-03-18 10:11:01 

 

In early 2026, the domestic methanol industry’s expectation for a return to stable demand for derivatives was dashed due to the ongoing conflict in the Middle East.

The disruption to shipping through the Strait of Hormuz has led to a global shortage of methanol and rising energy costs. As the world’s largest consumer and importer of methanol, my country’s methanol and derivatives market has been significantly impacted, with prices rising sharply. The industry chain is facing pressure to restructure its supply and demand, and the market outlook for the second quarter is shrouded in uncertainty.

Rich Sumner, CEO of Messe Nielsen, a global leader in methanol, recently stated that the de facto closure of the Strait of Hormuz has restricted the annual methanol supply of 18-20 million tons in the Middle East. This includes 9-10 million tons annually from Iran, and another 9-10 million tons from Saudi Arabia and Qatar combined, all facing supply difficulties due to the conflict. This impact directly affects China—ICIS supply and demand databases show that in 2025, Iran’s methanol exports will primarily go to China, with a small amount flowing to India. Saudi Arabia also exports a large quantity of methanol to the Chinese market. The complete disruption of methanol trade in the Middle East has directly cut off a core channel for China’s methanol imports.

Customs data shows that China’s total methanol imports reached 14.4054 million tons in 2025, with the Middle East accounting for nearly 70%. Iran alone contributed 55%-60% of the imports, with monthly exports to China exceeding 700,000 tons. This supply disruption directly triggered significant fluctuations in domestic methanol prices. Sumner revealed that the current transaction price in the Chinese methanol market has exceeded $300 per ton, and the domestic futures market has also reacted strongly. As of March 9th, the closing price of the Zhengzhou methanol futures main contract reached 2830 yuan per ton, an increase of over 600 yuan per ton since late February, representing a rise of over 25%. Spot prices at East China ports simultaneously broke through 2800 yuan per ton, reaching a new high for the year.

As major distribution centers for methanol imports, the inventory at ports in East and South my country has been rapidly reduced from its high levels.

However, it’s worth noting that ample domestic inventory and coal-to-methanol production capacity provide a buffer. As of February 2026, domestic port methanol inventory reached 1.41 million tons, a high level at the 90th percentile historically. Meanwhile, domestic methanol production capacity is mainly based on coal-to-methanol technology, accounting for approximately 60% of global capacity, with a total capacity of about 90-100 million tons. Currently, the operating rate of domestic coal-to-methanol plants has reached a high of 91.65%, with the capacity utilization rate in the main producing area of ​​Northwest China approaching 97%, all efforts are being made to make up for the import gap. Leading companies such as China Coal Energy and Baofeng Energy, with their integrated resource layout and cost advantages, have become the core supply support for the domestic market in the short term.

The rise in methanol prices has gradually spread to the domestic downstream derivatives sector.

Methanol is primarily used in the production of formaldehyde, methyl tert-butyl ether (MTBE), and acetic acid. Smaller quantities are used in the production of dimethyl terephthalate (DMT), methyl methacrylate (MMA), chloromethane, methylamine, ethylene glycol methyl ether, dimethyl ether (DME), biodiesel, and gasoline direct blending. The rise in methanol prices has also impacted these products.

In my country’s downstream methanol demand, methanol-to-olefins (MTO) accounts for more than 50%, making it the core demand sector. In 2026, MTO plants such as Guangxi Huayi will be put into operation one after another, which should bring significant demand growth. However, affected by the soaring raw material prices, coastal MTO companies, which are highly dependent on imported methanol, have had their profits severely squeezed, and some plants are already in a loss-making state, facing the risk of reducing load or shutting down.

In the domestic MMA (methyl methacrylate) market, demand remained stable but overall sluggish, with weak performance in end-user sectors such as construction hindering demand recovery. Originally, with arbitrage opportunities closed and import risks high, the market was expected to continue its tight supply-demand balance and price increases. However, the Middle East conflict exacerbated import uncertainty, and factors such as soaring energy prices, rising freight rates, and delayed import shipments further pushed up domestic MMA prices, leaving the industry facing dual pressures from both costs and demand.

The impact on the acetic acid market is relatively limited.

The closure of the Strait of Hormuz has hampered acetic acid exports from Saudi Arabia’s Sipchem Jubail plant, but the company has a small market share in my country, so its impact on the overall domestic acetic acid market is minimal. Domestic acetic acid prices are primarily determined by supply and demand; however, rising natural gas and energy prices due to the Middle East conflict will continue to increase acetic acid production costs. Industry analysts believe that with continued weak end-user demand and the easing of logistical problems caused by winter storms, the domestic acetic acid market is likely to return to a relaxed supply situation in the second quarter.

Looking at the overall downstream structure of methanol in China, demand from traditional sectors such as formaldehyde and MTBE accounts for about 20%, and is expected to maintain a moderate growth of around 5% in 2026, providing basic support for the market. Meanwhile, driven by the “dual-carbon” strategy, the application of methanol fuel in commercial vehicles, shipping, and other fields is gradually expanding, becoming a new highlight of demand growth. However, in the short term, supply shocks caused by geopolitics remain the core factor dominating the market.

Industry insiders generally believe that the core concerns in the domestic methanol and derivatives market in the second quarter are supply risks and rising energy costs, with both upward pressure on prices and the risk of shrinking demand coexisting.

Currently, China is accelerating the development of non-Middle Eastern import channels such as Russia, Central Asia, and the Americas, while simultaneously promoting the establishment of green methanol production capacity to gradually reduce reliance on Middle Eastern sources. In the coming weeks, the geopolitical situation in the Middle East will continue to be a focus of attention for the entire domestic methanol industry chain. The demand for methanol derivatives in the second quarter will also be reassessed in response to changes in the situation. Companies across the industry chain are actively responding, seeking alternative sources and cost control strategies to mitigate the risks of market volatility.