China methanol market grapples with increasing supply

Methanol inventory at China coastal regions increased continuously due to slow picking up of goods lately. Some tanks at reserve areas in Taicang, Jiangsu Province is reaching the maximum storage capability.

Since June 1, the Jiangsu Maritime Safety Administration has implemented a policy restricting berthing for vessels with ages over 25 years, diverting some imported cargo to non-mainstream storage areas in South China or East China coast. Zhejiang's Ningbo and Zhapu have recently become the primary discharge ports receiving the diverted cargoes, while arrivals at Jiangsu's Lianyungang and South China ports have also increased significantly.

In the future, imported cargo will continue shifting to non-mainstream storage areas and downstream plants, leading to a decline in the proportion of cargoes at public storage tanks.

CCFGroup's data show methanol arrivals to China are estimated at around 1.2-1.3 million tons in July, roughly little changed compared to the previous month.

From an arbitrage perspective, the import window remains open, with Chinese prices still relatively attractive to overseas suppliers. Due to weak demand in Europe, India, and Southeast Asia, coupled with higher operating rates at international methanol plants, more supplies are flowing into the Chinese market. Non-Iranian imports to China are expected to reach around 600,000 tons in August.

In the first half of 2025, China coal prices continued to weaken, leading to strong profitability for coal-to-methanol production and high industry operating intentions. As plants gradually resumed operations after the maintenance in July, domestic production steadily recovered.

Recently, under the impact of policies aimed at curbing excessive competition (termed "anti-involution policy"), coal prices have rebounded, supportive to methanol price. Nevertheless, with the intensive arrival of low-priced imported methanol cargoes and the recovery of domestic supply, whether the market can consume the excessive supply remains uncertain.

Currently, the methanol market faces multiple challenges, including high inventory levels, increasing imports, and the recovery of domestic supply, resulting in weak short-term fundamentals. However, rising coal prices may provide some support to the market.

Close attention should be paid to future import volumes, the recovery of downstream demand, and the impact of policies addressing overcompetition on supply-demand dynamics.