Main Perspectives
Core View: Bearish Overall, the current situation presents weak reality versus strong expectations. The core issue is when Iran will curtail gas supply. Methanol drivers are expected to remain relatively weak in the near term, but downside potential is limited. If Iran implements gas curtailment ahead of schedule in October, methanol prices are expected to rebound, though the magnitude will be constrained by MTO profit losses. If Iran's early gas curtailment fails to materialize, the improvement in Q4 supply-demand balance compared to Q3 would be diminished.
New Capacity: Neutral No new capacity is planned for production.
Domestic Operations: Neutral to Bearish Some facilities still plan to restart in the near term. Shenhua Xinjiang, Hebei Jinshi, and Jinchi Chemical plan to restart in mid-to-late September. With coal-to-methanol profitability remaining reasonable, operations are expected to recover somewhat.
Import Aspect: Bearish As of now, September imports totaling 982,100 tons have been discharged including berthed vessels. Late-month cargo schedules appear normal, though recent China-Europe and China-India price differentials have widened, re-export volumes remain limited. September imports are estimated at 1.6 million tons, but recent super typhoons may delay some shipments to October.
Port Inventory: Neutral to Bearish October import volumes currently appear likely to maintain high levels, but considering Xingxing's restart, port cargo flowing back inland, and re-export situations, ports are expected to continue accumulating inventory, though at a slower pace.
MTO Demand: Bullish Recent MTO profits have shown significant recovery overall, currently at moderately high levels compared to recent years. Xingxing is currently operating at full capacity normally, and Qinghai Salt Lake's olefin facility has restart plans in the near term. Overall, MTO demand expectations are relatively strong in the near term.
Traditional Downstream: Neutral During the peak demand season of September and October, overall operations are expected to improve somewhat, but significant incremental growth is unlikely.
Cost Aspect: Neutral Overall outlook for coal prices from September to November is optimistic.
01. Cost: Optimistic Expectations
Coal Prices: Weak-Stable Expectations
Coal prices have rebounded slightly recently, influenced by pre-holiday and winter storage stockpiling. The Inner Mongolia Autonomous Region Energy Bureau recently issued a "Notice on Production Capacity Verification of Coal Mines Region-wide," notifying previously over-producing mines. For mines whose monthly raw coal output exceeded announced capacity by 10% during January-June 2025, subsequent strict production suspension and rectification will be implemented according to national regulations. Over-producing mines will undergo dynamic supervision, forming long-term mechanisms. If mines continue production beyond announced capacity after verification, they will face strict penalties. Additionally, Shanxi Province has environmental inspection groups conducting surveys. Recent policy directions indicate the state will continue managing over-producing mine capacity, plus October Daqin Line maintenance. We expect limited significant increases before year-end. Regarding demand, winter storage trader stockpiling typically concentrates in September-November. Overall, we are optimistic about coal prices from September to November.
02. Supply: Core Focus on When Iran Will Curtail Gas
Profitability: Monitor Whether Gas-Based Facilities Curtail Early
This year, due to significant coal price declines, coal-to-methanol profitability has been very considerable. Stimulated by high profits, domestic operations this year are significantly higher than the same period in previous years. Although recent coal-to-methanol profits have declined, overall profitability remains reasonable. Due to optimistic expectations for Q4 coal and gas-based facility profits suffering significant losses, early gas curtailment is possible this year, with Q4 operations expected to decline.
Domestic Operations: Improvement Expected
September: Some facilities still plan to restart in the near term. Shenhua Xinjiang, Hebei Jinshi, and Jinchi Chemical plan to restart in mid-to-late September. With coal-to-methanol profitability remaining reasonable, operations are expected to recover.
October restart plans are numerous, with operations expected to improve, though October production increases are expected to be limited.
New Capacity: No New Supply Volume
This year has approximately 6.6 million tons of planned new capacity, most with downstream integration. Most new capacity was commissioned and operating normally in the first half. Q4 only has a few bio-methanol capacity plans for commissioning, but commissioning likelihood is low, so Q4 has no new supply increments.
Next year's first half basically has no new supply volume.
Imports: Monitor Whether Iran Curtails Gas Early
As of now, September imports totaling 982,100 tons have been discharged including berthed vessels. Late-month cargo schedules appear normal. Though recent China-Europe and China-India price differentials have widened, re-export volumes remain limited. September imports are estimated at 1.6 million tons, but recent super typhoons may delay some shipments to October. Iran has shipped approximately 740,000 tons to date. Non-Iranian facility utilization is high, with October imports expected to maintain high levels.
Overseas Facility Commissioning: Apadana commissioned in H1, Dena in H2, but commissioning within the year appears unlikely.
Import: Monitor Whether Iran Curtails Gas Early
Another aspect is Iran gas curtailment expectations: Combining reports from domestic mainstream media since July-August about Iran's severe shortages of natural gas, water, and electricity, early gas curtailment seems reasonable (Iran's total capacity continues expanding; once gas curtailment starts, the production capacity base is larger, creating more severe market impact). Iran's gas curtailment timing requires close attention.
Overall, September-October import volumes are expected to remain high. Focus should be on Iranian facility gas curtailment timing. Once Iran begins gas curtailment, import volumes will likely start declining.
03. Demand: Stable MTO & Traditional Downstream Increments Below Expectations
MTO: Relatively Strong Expectations
Regarding MTO, recent MTO profits have shown significant overall recovery, currently at moderately high levels compared to recent years. Xingxing is currently operating at full capacity normally, and Qinghai Salt Lake's olefin facility has restart plans in the near term. Overall, MTO demand expectations are relatively strong in the near term.
Traditional Downstream: Acetic Acid, MTBE New Demand May Fall Short of Expectations
Recent acetic acid operations have declined, mainly due to concentrated facility maintenance in early September. October maintenance plans are more concentrated, with operations expected to continue declining in October. Three facility commissioning plans exist for H2, with Xinjiang Zhonghe and Zhejiang Petrochemical already producing. Xinjiang Zhonghe has 600,000 tons planned, operating 300,000 tons, with limited utilization due to regional and transport radius constraints. Zhejiang Petrochemical has 1 million tons in integrated facilities, currently producing acetic acid with shutdown plans until supporting methanol facilities commission for joint production. Juzhengyuan has 1.5 million tons (planned year-end trial operation). This year's increments are limited, so Q4 new capacity increments are limited overall.
Traditional Downstream: Acetic Acid, MTBE New Demand May Fall Short of Expectations
Current MTBE facility profits are in loss territory, mainly due to poor downstream demand this year. One factor is refined oil replacement by new energy, and MTBE industry high dependence on export markets. From late September through year-end, export conditions remain unfavorable. Q4 has Sanjiang and Zhongpu each with 660,000 tons new capacity planned for commissioning, but due to poor downstream demand, Q4 new capacity, even if commissioned smoothly, will see overall declining operations, causing new demand to fall short of expectations due to poor demand conditions.
04. Port Inventory: Accumulate First, Then Decline?
Port Inventory: Accumulate First, Then Decline?
Q3 port inventory accelerated accumulation, mainly due to conflict resolution and adverse weather affecting massive August-September imports. Current port inventory has reached 1.5578 million tons, breaking historical records since 2020. Based on recent planned arrivals, end-September port inventory will accumulate to approximately 1.6-1.7 million tons. Ports can still accommodate this volume; at least until end-September, tank capacity tensions won't emerge. October import volumes currently appear likely to maintain high levels, but considering Xingxing's restart, port cargo flowing back inland, and re-export situations, ports are expected to continue accumulating inventory, though at slower pace. When accumulation patterns reverse requires close attention to this year's Iran gas curtailment timing.
05. Price Spreads
Port and Inland Price Spreads Continue Widening
Recent methanol markets continue differentiation, with inland markets still outperforming ports. As port-inland spreads widen, arbitrage windows remain smoothly open, with low-priced port sources accelerating flow back to inland markets through trucking, shipping, and other channels. East China and South China public warehouse withdrawals have increased significantly, with Taicang sources flowing back to Anhui, Shandong, Jiangxi, and other inland provinces. Due to expected continued port inventory accumulation, port spot prices face continued decline risks, so port-other regional spreads may continue widening.
Basis: May Stabilize Then Strengthen
Since Q3, inventory has accelerated accumulation, pushing basis to extremely low levels. Due to Q4 expectations of Iran gas curtailment and Lianhong commissioning, basis is expected to stabilize then strengthen.
Price Spreads
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