Oversupply of methanol is difficult to turn "clear"

The short-term support from gas restriction policies has given a temporary boost to methanol prices, but it hasn't reversed the broader trend of oversupply. As a result, the recent price rebound continues to face significant pressure. While off-season trading remains slow, there are still opportunities for investors who focus on major capital movements and stay attuned to market dynamics. The impact of the limited gas policy has started to fade, and despite some production cuts in certain regions, overall supply remains strong. Spot prices have seen some support due to the policy, with small-scale traders pushing prices up to 2,800 yuan per ton. However, the large inventory levels indicate that supply exceeds demand, and both manufacturers and traders are aggressively lowering prices to clear stock. By December 21, Jiangsu's inventories reached 499,800 tons, up 74,800 tons from the start of the month — a 17.8% increase — marking three consecutive weeks of rising stockpiles, nearly hitting the annual peak. Although several natural gas-based methanol plants in Shaanxi, Inner Mongolia, Lanzhou, and Qinghai reduced output or shut down due to gas restrictions, the daily loss in production was around 1,500 tons. However, other facilities continued operating at over 60% capacity, quickly filling the supply gap. Meanwhile, coastal inventories keep climbing, weakening the policy’s supportive effect and putting more downward pressure on methanol prices. Traditional downstream demand remains weak, and new sectors like dimethyl ether and acetic acid haven’t helped lift prices. Prices for these products dropped by 50–100 yuan per ton in eastern markets compared to the end of last month. This decline in downstream product prices has created a downward trend, which in turn reduces methanol demand and further hinders price increases — creating a negative cycle that shows no sign of breaking. On the other hand, new methanol-to-olefins (MTO) projects are still under construction or in trial stages, so they haven’t yet contributed meaningfully to demand. According to the EPCA, global methanol demand is expected to grow by 10.5% annually over the next five years, with most of the new demand coming from Asia’s MTO plants. With the off-season approaching and the "Golden September, Silver October" sales period ending, trading volumes have declined. However, main capital flows remain active, with top 20 members accounting for over 54% of daily turnover. Their high synchronization with market trends makes them a key indicator for investors, especially during low-volume periods. In summary, the continuous rise in coastal inventories has not only filled the supply gaps caused by gas restrictions but also brought stockpiles back to historical highs. At the same time, traditional downstream demand hasn’t improved, and emerging sectors aren’t stepping up to take the lead. Overall, the methanol market remains in an oversupply situation, with sustained downward pressure on prices.

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