China's Methanol Prices Hit Six-Month Low Amid Supply-Demand Imbalance
China's methanol market has experienced sustained downward pressure since the second half of the year, with prices hitting fresh lows, though analysts suggest a foundation for stabilisation is now emerging.
As of November 20, the mainstream transaction price for methanol in China had fallen to approximately 2,000 yuan per ton. The national average price stood at 2,042 yuan per ton, representing a decline of over 11% in the past six months.
Industry analysis indicates the prolonged price weakness is primarily attributable to a market imbalance of increased supply against a backdrop of subdued demand, compounded by pressure from weaker international markets.
However, with the onset of winter, market pessimism is beginning to ease. Factors including foundational support from upstream production costs, a shift towards a tighter supply-demand dynamic, and continued draws in inventory are contributing to expectations that prices will stabilise.
Cost Support
A representative from the Henan Petrochemical Association noted that while China's methanol industry saw growth in both production and consumption in 2024, market mismatches have driven prices lower since the second half of 2025.
The feedstock structure is a critical factor. Coal-based methanol dominates China's production, accounting for 78.3% of total capacity. Within this, new coal gasification technology constitutes 72.5% of coal-based capacity. Methanol production from coke oven gas and other waste gases accounts for 14.4% of total capacity. Consequently, fluctuations in upstream energy costs directly impact methanol market pricing.
The decline in coal prices during 4 alleviated cost pressures for many producers. However, beginning in the winter of 2025, firm coal prices coupled with rising natural gas costs are expected to pressure both coal-based and natural gas-based methanol production. This strengthening cost support provides a basis for the market to stabilise after recent lows.
Supply Declines, Demand Rises
Industry data shows China's methanol production capacity grew steadily to surpass 112 million tons per year in 2024. New capacity additions in 2025 are projected to reach 5 million tons, an increase of over 4.4%. Against a backdrop of sluggish downstream demand, this supply growth contributed to the market's weakness.
A significant shift occurred in late November. During the week of November 20, China's total weekly methanol supply was recorded at 2.303 million tons, while total demand reached 2.3779 million tons, marking a reversal from the previous week's pattern.
On the supply side, the commencement of Iran's heating season in December is projected to slash methanol imports by 50%. Domestically, rising natural gas prices are pushing production costs higher, leading to a trend of reduced output among Chinese manufacturers.
Regarding demand, the dominant methanol-to-olefins sector has seen some producers reduce self-production and increase external procurement due to cost pressures, creating short-term demand growth. Methanol fuel, the second-largest application, has become a key driver, supported by seasonal heating and shipping demand. In traditional downstream sectors, essential demand for formaldehyde, acetic acid, and methyl tert-butyl ether (MTBE) remains stable. Emerging applications, including 1,4-butanediol and methanol-to-hydrogen, are also becoming new engines for demand growth.
Inventory Declines
Data indicates that as of November 22, inventory at methanol sample enterprises across China stood at 358,700 metric tons, continuing a trend of modest drawdowns.
Regionally, inventory decreased in most areas except Southwest China, where weak demand led to accumulation. Northwest China saw significant reductions, supported by external olefin procurement and active inventory clearance by holders. Inventories in other regions also retreated as producers offered discounts or reduced production rates.
Port representatives indicated that high overseas utilisation rates, particularly from Iranian plants operating at full capacity, led to elevated imports. October imports reached 1.65 million tons, and November volumes remained high, pushing port inventories to historically elevated levels and pressuring prices.
However, driven by restocking in inland regions, port inventories began a noticeable decline starting in the third week of November. Social warehouses in East China saw robust withdrawals, while port inventories in South China also continued a downward trend. The ongoing inventory reduction is expected to contribute positively to market stabilisation.
Nevertheless, industry insiders caution that as idled plants in China gradually resume operations, overall supply capacity is expected to rise. Furthermore, with some olefin producers concluding phased restocking and potential pass-through of increased winter trucking costs, further downward pressure on ex-factory prices cannot be ruled out.
Analysts conclude that the supply-demand tug-of-war is likely to persist in the short term, with methanol prices expected to consolidate within a narrow range as the market seeks recovery.