China's Methanol Market Sees Widening Port–Inland Price Divergence in H2 2025

Since the second half of 2025, China's methanol market has experienced a pronounced divergence between port and inland prices, with inland markets outperforming port prices for most of the period. Port prices remained under sustained downward pressure amid heightened volatility, while inland prices showed relative resilience before weakening later in the year.

The divergence was primarily driven by record-high methanol imports and continuous inventory accumulation at ports. In contrast, inland prices were supported by persistently low producer inventories and frequent external procurement by coal-to-olefins producers, although these supportive factors weakened toward year-end.

High Imports Weigh on Port Prices

From the second half of the year, port methanol prices faced ongoing downward pressure due to the combined effect of elevated imports and high inventories. According to China Customs data, methanol imports exhibited significant intra-year fluctuations. Monthly imports remained below 1 million tonnes between February and April, but rose sharply in the latter half of the year, reaching a record high of 1.75 million tonnes in August. Imports subsequently remained elevated at 1.4–1.6 million tonnes per month.

As a result, port inventories climbed steadily and peaked in September. Although China's ethylene operating rates remained relatively high during the third quarter, the scale of accumulated inventories required time to be absorbed. At the same time, high global operating rates — particularly in the Middle East, where plants resumed normal production following the Iraq–Israel conflict — combined with weak overseas demand, redirected large volumes of supply toward the Chinese market.

From November, Middle Eastern methanol plants entered a gas-restriction shutdown cycle, leading to a sharp decline in operating rates, with Iran's rate falling from above 80% to around 20%. However, due to shipping and transportation cycles, the impact of reduced overseas supply will only be fully reflected in China's import volumes in January 2026. Consequently, throughout the fourth quarter, port prices remained overshadowed by the dual pressure of high imports and high inventories.

A short-lived inventory drawdown occurred between late November and early December, driven by port unloading constraints, weather-related shipping suspensions, and other logistical factors. During this period, port methanol inventories declined from 1.27 million tonnes to approximately 1.11 million tonnes.

Inland Markets Supported by Supply Tightness and Olefin Demand

In mainland China, methanol prices across major regions — including Northwest China, Central China, Shandong, and Southwest China — displayed strong upward momentum during the third quarter. This trend was mainly driven by supply-side tightness and increased external procurement by olefin producers.

In late July, maintenance shutdowns at the Ningxia CTO plant's methanol facility exacerbated raw material shortages. Downstream users increased procurement to build inventories, with external purchases rising to 86,500 tonnes in July, up sharply from 32,000 tonnes in June. As a result, upstream producers' inventories remained low, with methanol plant inventory days averaging around 4.81 days in early August.

Against the backdrop of diverging inland and port price trends, the price spread between Taicang Port and Shandong turned persistently negative from August onward, reaching -120 yuan/tonne in September. This sustained inversion encouraged port cargoes to flow inland.

However, despite continued domestic demand support, inland prices weakened in the fourth quarter across Northwest China, Shandong, Central China, and Southwest China. This was largely due to domestic operating rates stabilising at 83%–84%, coupled with the influence of declining futures prices and weak port markets, leaving inland markets vulnerable to broader market pressures.

Structural Changes in the Second Half of the Year

Several structural shifts emerged in the methanol market during the latter half of 2025.

First, port import patterns changed following the introduction of sanctions in October, which led most commercial storage facilities to refuse Iranian cargoes. As a result, imports entering commercial storage declined, while deliveries into downstream tank farms increased significantly. In addition, some vessels were diverted northward to Shandong, with cargoes flowing into northern Shandong after November. In early November, prices in northern Shandong exceeded those at Taicang Port by 100–140 yuan/tonne, making such diversions more profitable. Traders adjusted distribution strategies accordingly, at times causing temporary logistical capacity constraints. Meanwhile, non-Iranian cargoes from unconventional sources also appeared, with November imports including approximately 40,000 tonnes from Egypt and 36,000 tonnes from South Korea.

Second, coal-to-olefins demand dynamics improved. As methanol prices declined in the second half of the year, olefin production margins rebounded significantly. Comprehensive margin calculations show losses narrowing from -901 yuan/tonne in the first half to -372 yuan/tonne in the second half, with positive margins recorded in mid-November. Mainland olefin plants, including Baofeng, continued external methanol procurement. Additional demand was created after November by maintenance at JiuTai's methanol plant. Furthermore, Lianhong New Materials' Phase II MTO facility, with a capacity of 450,000 tonnes per year, is scheduled to start operations around 10 December, further boosting feedstock procurement.

Third, coal-to-methanol margins in mainland China contracted sharply. Coal inventories declined steadily mid-year due to peak summer power demand. In the second half, production fell under anti-overcapacity policies and crackdowns on excessive output, pushing coal prices higher. Entering the fourth quarter, heating-season demand and coal supply security policies kept coal prices firm. After a brief period of resilience in the third quarter, methanol prices fell in the fourth quarter, significantly compressing coal-to-methanol margins.

Outlook

Looking ahead, market participants are expected to focus on several key variables: the delayed impact of reduced port imports, likely to become evident in January 2026; the sustainability of external procurement by mainland olefin producers; additional procurement following the commissioning of Lianhong's Phase II facility; the timing of new MTBE capacity releases; and ongoing cost pressure from coal feedstocks on mainland margins. Over a longer horizon, attention will also turn to mainland China's spring maintenance season and the commissioning schedules of new downstream projects, including Guangxi olefins and Guangdong acetic acid capacity.