I. Market Trend Review

Methanol futures fluctuated weakly in the week before the Spring Festival as Middle East geopolitical conflicts eased. On the first trading day after the holiday, methanol futures opened and traded higher, surging over 3% in early trading to recoup losses from the previous week.

The spot market remained relatively stable. Trading activity was subdued in the week before the holiday, with limited price fluctuations at ports. Inland manufacturers maintained firm quotations after completing pre-holiday price cuts and inventory reductions, with prices in the northwest region showing a notable rebound. Post-holiday, coastal port prices rebounded in line with futures, though market activity has yet to fully recover.

II. Supply Side: Domestic Supply Surges While Overseas Plant Utilization Remains Low

Domestic supply remains elevated. China's January methanol output reached 9.0024 million tons, down 66,800 tons from December but still the second-highest monthly level in recent years. Plant utilization rates climbed above 90% in February, with monthly production expected to hit a new record high. High-frequency data indicates that during the week ending February 20, domestic methanol plant capacity utilization reached 92.75%, up 0.68 percentage points month-on-month and 3.63 percentage points year-on-year. Weekly output totaled 2.072 million tons, an increase of 15,200 tons from the previous week. By production process: - Northwest China facilities, primarily coal-based, operated at over 97% capacity utilization with full output release. - Coal-to-methanol plants produced 1.5452 million tons (+14,400 tons MoM). - Coal-to-methanol-and-ethanol plants produced 196,100 tons (+800 tons MoM). Natural gas-based plants produced 131,000 tons, a slight decrease from the previous week. Coke oven gas plants produced 191,500 tons, remaining largely unchanged week-on-week.

Overseas plant capacity utilization rates saw a narrow rebound but remained at low levels for the same period. Data indicates that during the week ending February 20, overseas methanol plant operating rates reached 51.24%, up 4.99 percentage points from the week before the holiday but 7.24 percentage points below the historical average for this period. Weekly output totaled 747,500 metric tons, an increase of 72,700 metric tons week-on-week but a decrease of 82,700 metric tons year-on-year. Changes were primarily concentrated in non-Iranian regions, with North American plants gradually resuming operations. while Indonesian plants restarted operations. However, a plant in Brunei, Southeast Asia, experienced a shutdown due to malfunction. Should progress emerge in U.S.-Iran negotiations and tensions ease, methanol prices may face downward pressure.

III. Demand Side: Post-Holiday Consumption Recovery Will Take Time

On the demand side, the industry has entered a seasonal slowdown, with downstream buyers adopting a cautious approach to procurement.

MTO (Methanol to Olefins) demand has shown some recovery but remains generally weak.

Affected by the Spring Festival holiday, most downstream industries exhibit seasonal weakness with widespread declines in operating rates, significantly dampening methanol demand. Steady recovery in gasoline demand provides some support, but slow post-holiday resumption of operations has yet to fully unleash demand. Overall, traditional downstream demand remains in its seasonal trough. Post-holiday, as enterprises gradually resume operations, demand is expected to recover slowly. However, it is unlikely to generate effective traction in the short term, leaving the overall demand side still weak.

IV. Inventory: Port inventory pressure remains significant

Inventory levels remain elevated overall. For the week ending February 13, domestic methanol social inventory stood at 1.7726 million tons, down 7,400 tons week-on-week but up 303,100 tons year-on-year. The inventory scale remains above historical averages for this period. The slight weekly decrease was primarily driven by destocking efforts among inland manufacturers, while the year-on-year increase reflects that the current supply-demand imbalance has not fundamentally improved.

V. Cost Perspective: Warmer temperatures usher coal into off-peak consumption season, but limited downside for coal prices due to Indonesian production cuts

Cost-wise, both coal-based and natural gas-based production facilities operate at a loss, while coke oven gas plants maintain marginal profitability. The cost of coal-to-methanol plants is primarily anchored to coal prices. Before the holiday, domestic thermal coal prices rose mainly due to Indonesia's voluntary production cuts and tight seaborne coal supply in the Asia-Pacific region, which supported domestic coal prices. During the holiday, large coal enterprises in producing regions maintained normal production, while most private mines suspended operations, keeping market coal supply tight. Post-holiday, supply gradually recovered. On the demand side, average temperatures across most regions of China during the Spring Festival holiday were higher than the historical average for the same period. Residential electricity consumption experienced periodic weakening, while industrial electricity demand also declined significantly due to factory closures.

VI. Macro: Surging Crude Oil Boosts Sentiment in Chemical Sector

Internationally, crude oil prices exhibited an upward trend with volatility around the Spring Festival period. As the core pricing anchor for the chemical sector, the rise in crude oil prices directly lifted sentiment across the entire chemical industry. Chemical products overall showed a volatile yet firm trend, with methanol—a fundamental chemical feedstock—also experiencing a fluctuating rebound in price. Overall, the impact of rising crude oil prices on methanol primarily manifests in market sentiment. Sustained crude oil gains would further drive methanol prices upward, while a crude oil pullback would exert downward pressure on methanol prices.

VII. Geopolitical Tensions Boost Risk Appetite, Driving Methanol's Strong Rebound

The core contradiction in the current methanol market remains centered on the contrast between weak industrial fundamentals and strong macroeconomic disturbances. The prevailing landscape features: high domestic supply coupled with tight overseas supply on the supply side; seasonal weakness followed by post-holiday recovery on the demand side; high port inventories with structural divergence on the inventory side; stable cost support with profit divergence on the cost side; and bullish sentiment with geopolitical disturbances on the macro side. Domestic methanol supply remains ample, with production expected to hit new highs. Overseas supply is tight, though Iran's winter gas-restricted shutdowns are nearing completion. However, rising geopolitical risks in the Middle East have boosted market risk appetite. Demand is in a seasonal trough but is gradually recovering as the Spring Festival holiday ends and temperatures rise. Port inventory pressures will continue to constrain methanol's upside potential. With bullish and bearish factors intertwined, methanol prices are unlikely to form a one-sided trend in the short term, instead exhibiting a moderately bullish oscillation. In the near term, as downstream enterprises resume operations post-holiday, demand from MTO (Methanol to Olefins) and traditional sectors is steadily recovering. This is compounded by geopolitical premiums stemming from tensions in Iran, sentiment support for the chemical sector driven by rising international crude oil prices, and the realization of expectations for reduced imports. Methanol prices are likely to fluctuate with an upward bias. Resistance levels to watch are 2350-2400 RMB/ton. Should downstream demand recovery fall short of expectations, port inventories struggle to deplete effectively, and tensions in Iran ease while import supply gradually resumes, methanol will face downward pressure.

As an integrated internet platform providing benchmark prices, On February 25, the SunSirs methanol benchmark price was 2255.83 RMB/ton, a decrease of 0.4% compared with the beginning of the month (2265.00 RMB/ton).

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