China's Methanol Market in June: Macro Forces Drive Record-High Production

China's methanol market in June was marked by a clear macro-driven uptrend, underpinned by historic highs in domestic production, robust import volumes, and varied downstream demand dynamics. Despite volatility in international markets and geopolitical tensions, China's methanol fundamentals remained largely resilient, though regional disparities between coastal and inland markets became more pronounced.

China's Methanol Market in June: Macro Forces Drive Record-High Production; July Outlook Remains Regionally Divergent

China's methanol operating rate surged in June, reaching record levels. As of June 30, the national methanol plant operating rate stood at 87.11%, up 3.88 percentage points from the end of May and 12.30 percentage points year-on-year. The average monthly operating rate for June was 84.39%, reflecting a 1.03 percentage point increase from May and 8.61 percentage points higher than the same period in 2024.

Strong coal-to-methanol margins continued to incentivize production, while most facilities had completed their spring maintenance cycles. Limited new maintenance announcements further supported high operating levels.

2. Imports Remain Elevated

China's methanol imports remained robust in June, driven by high overseas loadings in May, when some producers operated near 80% capacity. Preliminary estimates place June's import volume between 1.25 to 1.3 million tonnes.

China's theoretical total methanol demand in June showed notable month-on-month and year-on-year increases. However, the performance of downstream segments varied significantly:

1) Weaker Demand:

* DMF (Dimethylformamide): Lower demand and high production costs led to oversupply and widespread plant shutdowns.

* BDO (1,4-Butanediol): Soft demand and planned maintenance reduced consumption.

* DME (Dimethyl Ether): High summer temperatures reduced fuel consumption, compounded by falling LPG prices, which weighed on DME sales. Many DME plants operated based on sales-driven output.

2) Stronger Demand:

* MTBE (Methyl Tert-Butyl Ether): Benefited from strong crude oil prices and export orders.

* Acetic Acid: Solid demand, with few plant outages; new facilities in Xinjiang and Shanghai postponed production launches.

* Formaldehyde: Demand remained sluggish in southern China due to the rainy season but improved in the north.

Methanol inventories at major eastern and southern Chinese ports saw a noticeable increase. Total social inventory ranged from 449,500 to 534,100 tonnes during the month. Strong import arrivals and inland-to-port arbitrage, driven by rising port prices, contributed to the build-up. As of June 26, port inventories stood at 534,100 tonnes, up 139,700 tonnes from late May-a 35.42% increase. However, average monthly inventory was still 5.6% lower year-on-year.

International and Domestic Market Performance

In June, Asia's methanol market was characterized by weak fluctuations:

* Month-on-month changes: CFR Southeast Asia down 0.60%, CFR Korea down 5.69%, CFR India up 0.37%, CFR China up 7.36%.

* Year-on-year declines: All major regions saw price drops, with CFR Korea falling by 12.74% and CFR China down 6.73%.

China's methanol market exhibited distinct regional trends. Port prices outperformed inland markets, largely due to Middle East geopolitical developments.

* Early June: Market sentiment was lifted by shipping age restrictions and progress in U.S.–China trade negotiations, leading to price gains at ports and a mild inland rally.

* Mid-June: Israeli airstrikes on Iran's key gas fields caused large-scale methanol plant shutdowns, triggering global supply concerns. Paired with a spike in crude oil prices, both spot and futures markets surged. Taicang spot premiums rose sharply.

* Late June: As Iranian facilities resumed operations and a ceasefire agreement eased tensions, the geopolitical risk premium faded. Energy and chemical markets corrected downward.

* End of June: Ports remained resilient due to short-squeeze activity, while inland prices showed limited follow-through. Regional divergence became more pronounced.

By June 30, the China Methanol Industry Index stood at 2,401 points, up 205 points from May-end.

The Zhengzhou Commodity Exchange's methanol futures contract MA2509 exhibited a sharp rally followed by a correction. It traded within a 2,193–2,588 yuan/tonne range throughout June, with the monthly high occurring on June 23. The total range of movement was 18%, driven by shifting geopolitical risk premiums.

* Domestic Production: July operating rates may see a slight dip early in the month due to scheduled maintenance, followed by a rebound later. Operating rates are expected to remain above 86%. Around 7 million tonnes/year of capacity was offline in June; planned July outages in northwest China include major producers like Yanzhou Coal Yulin, Xin'ao, Shenmu, Wehua, Yigao, Guanghui, and Huating.

* Imports: Despite some Iranian production halts in June, partial restarts and increased non-Iranian shipments will likely limit the import decline. July arrivals are expected near 1.2 million tonnes, though final figures depend on customs data.

* Formaldehyde: Operating rates around 30%; southern demand may recover post-rainy season, suggesting a “decline-then-rise” trend.

* DME: Output remains under 100% capacity, with limited improvement expected.

* Acetic Acid: Operating near 90%; no major outages planned. Attention will be on delayed startups of major new plants in Shanghai and Xinjiang.

* Olefins: Central and eastern China plants face shutdowns. Central China's key facilities plan for a 50-day halt, while others are undecided. Overall olefin capacity utilization may dip to around 76.9%.

The Chinese methanol market in July is likely to remain regionally divided:

* Ports: High prices may soften due to demand resistance and incoming low-cost inland supplies.

* Inland: Despite seasonal demand pressure from hot weather, certain supportive factors-like recovering MTBE production and new acetic acid plant launches-may help stabilize prices. Several planned maintenance events could tighten supply and trigger localized price surges.

Overall, July's methanol market will be shaped by internal fundamentals and external uncertainties. Key factors to monitor include:

* Macroeconomic shifts

* Iranian export dynamics

* Port inventory changes

* Upstream and downstream plant operating rates across China

As the second half of 2025 begins, China's methanol market remains in flux, balancing strong supply with varied demand and global uncertainties. Stakeholders should prepare for continued volatility and closely track both domestic and international developments.