The impact of Middle East conflicts on global supply chains is extending beyond the energy sector into the chemical industry. As a crucial raw material linking energy and manufacturing, international methanol prices have risen significantly recently. From the outbreak of the conflict to March 20 local time, the CFR Southeast Asia methanol price, which includes shipping costs, surged by 72%, reaching $555 per ton on March 20, its highest level since March 26, 2021.

Following the outbreak of Middle East conflicts, the global methanol market has faced clear pressure. Data from S&P Global indicates that due to tightening supply, methanol prices in Southeast Asia have risen sharply recently, remaining relatively high compared to other major markets. Methanol is a vital basic chemical feedstock, used not only to produce core chemicals like methyl tert-butyl ether, acetic acid, and formaldehyde but also widely applied in fuel additives and the manufacturing of everyday consumer goods such as plastics and building materials.

A recent report from S&P Global Commodity Insights shows that since the conflict began, spot methanol prices in regions including Southeast Asia, India, Europe, and the United States have increased to varying degrees. Specifically, the CFR Southeast Asia price surged 72% from the conflict's start to March 20, reaching $555 per ton.

Several factors are driving the price increase. Firstly, regarding supply, global methanol production primarily follows two pathways: one using natural gas as a feedstock and the other using coal. The more cost-effective natural gas-based production is heavily concentrated in the Middle East. Secondly, concerning logistics, Middle Eastern methanol exports heavily rely on maritime shipping, particularly transit through the Strait of Hormuz. Amid current tensions, shipping disruptions and rising freight and insurance costs have pushed up delivered prices. Additionally, supply uncertainties have prompted anticipatory purchasing and stockpiling, further amplifying price volatility.

Data from Independent Commodity Intelligence Services (ICIS) indicates that Iran is one of the world's major methanol exporters, with exports exceeding 9 million tons last year. Concurrently, the CEO of Methanex, a global industry leader, noted that including other Middle Eastern countries like Saudi Arabia, Qatar, and Bahrain, the affected methanol supply could increase by approximately 9 to 10 million tons. Overall, an estimated 18 to 20 million tons of annual methanol supply from the Middle East is currently constrained.

Southeast Asian markets are particularly affected. According to Argus Media, an international energy and commodity price reporting agency, Southeast Asia imported approximately 1.9 million tons of methanol last year, with about 40% sourced from the Middle East. The impact is already spreading to downstream industries; for instance, Indonesia's biodiesel production is affected. As the world's largest palm oil producer, Indonesia requires significant amounts of methanol to process palm oil into biodiesel for blending into fuels. Therefore, rising methanol prices or supply constraints directly increase production costs and could potentially reduce local biodiesel output.

According to Bloomberg, citing informed sources, if supply disruptions persist, Indonesia's inventories could decline rapidly, and biodiesel production might fail to meet government monthly quotas as early as April. Biodiesel is a crucial supplementary energy source for Indonesia. While the Middle East conflict has already disrupted oil and gas transportation, tightening traditional energy supplies, the methanol price surge is now constraining alternative energy output, further exacerbating local energy supply pressures.

Influenced by the Middle East situation, domestic methanol prices in China have also risen recently, with spot prices briefly exceeding 3,300 yuan per ton. Prices have remained volatile at high levels this week. How are downstream producers responding to these raw material price fluctuations? It is understood that while China's methanol self-sufficiency rate exceeds 80%, a gap of less than 20% relies on imports, predominantly from Middle Eastern countries. Recent tensions and shipping disruptions have sharply reduced methanol arrivals at Chinese ports, driving prices up more than 50% from their low point this year. On March 25, the domestic methanol spot price was reported at 3,140 yuan per ton, up 1.45% for the week and 46.2% for the month.

As a flammable liquid, methanol requires specialized tanker trucks for transport. Issues like one-way trips and frequent empty returns contribute to high long-distance transportation costs, accounting for 15%-30% of the methanol price. Consequently, downstream enterprises near ports, which typically rely on seaborne imports, have seen significant increases in raw material costs recently.

Facing reduced import supplies, many downstream firms are actively turning to the domestic market for alternative sources. At a chemical enterprise in Lianyungang, Jiangsu province, numerous methanol tankers were seen queuing for unloading. Drivers reported increased transport frequency. A company representative stated that while about 60% of their methanol was previously imported, they are now increasing domestic procurement and maintaining substantial raw material reserves. With rising prices for downstream chemical products like ethylene and propylene, companies plan to gradually increase production capacity utilization.

Liu Yong, Head of Bulk Raw Material Supply Chain at a Jiangsu Lianyungang Petrochemical Group, said: "Since late last year, leveraging our storage advantages, we have maintained high methanol inventories, sourcing from both domestic and international channels through diversified procurement. This year, we have added five new domestic methanol contract suppliers, and overall inventory remains within a relatively safe range."

Meanwhile, China's abundant coal resources provide an advantage, as coal-based methanol production capacity can largely meet domestic downstream demand. Zheng Xiyu, Senior Methanol Analyst at Guosen Futures Research Institute, noted: "Port methanol inventories have begun to decline but remain about 35% higher than the same period last year. Recently, profitability for coal-based methanol production has improved, encouraging strong operational willingness among producers, with operating rates sustained above 80%, acting as a market stabilizer."