US-China Trade War's Ripple Effects: Methanol Market Braces for Indirect Shock

The broader strategic competition between the United States and China continues to exert a profound influence on global commodity markets, with a recent intensification of trade conflicts following China's National Day holiday deepening market uncertainties.

While the United States has imposed substantial tariffs on a range of Chinese goods, an analysis of trade flows indicates the direct impact on the methanol sector is limited, though significant indirect consequences are emerging.

Data from the past two years reveals minimal direct methanol trade between the two nations. On the import side, China's methanol supply is predominantly sourced from the Middle East, with US shipments constituting a negligible portion. In 2024, China's total methanol imports reached approximately 13.4842 million tons. Of this, imports from the United States amounted to just 24,900 tons, representing a mere 0.18% of the total.

This trend has continued into 2025. Customs data for January to August shows China's methanol imports totalled 8.24 million tons, with the share from the US remaining nearly zero.

On the export front, China's methanol shipments are primarily transshipments concentrated in neighbouring Asian countries and remain modest in scale. In 2024, China's total methanol exports were approximately 157,200 metric tons. Exports to the United States accounted for just 19.80 metric tons, or 0.01% of the total. From January to August 2025, China exported 170,000 metric tons of methanol, of which 26.49 metric tons were destined for the US, accounting for 0.02%.

Therefore, the exceptionally low trade volumes suggest that direct US tariff hikes will have a relatively minor immediate effect on the methanol market. However, analysts warn of significant indirect effects stemming from industrial chain reactions. These include potential knock-on impacts from crude oil market volatility, such as the sharp fluctuations witnessed in April, which can affect chemical products like methanol.

A more detailed examination of the supply chain indicates the Sino-US tariff war is directly disrupting the cost structure of China's propane dehydrogenation (PDH) industry. One immediate consequence is the risk of supply chain disruption. Another is the increased cost of finding alternative raw material sources.

While the Middle East is a major propane supplier, its exported liquefied gas often contains butane, making separation more costly. Furthermore, transportation cycles from the Middle East are twice as long as those from the US. As Chinese importers intensively seek alternative propane sources, import prices have surged significantly, placing considerable cost and supply pressure on PDH producers previously reliant on Middle Eastern supplies.

US Sanctions on Iranian Vessels Escalate, Threatening China's Methanol Imports

In a separate but related development, US sanctions against Iran have progressively tightened. On 9 October 2025, the US Treasury Department announced a new round of sanctions explicitly targeting Iranian vessels and related shipping networks, aiming to constrain Iran's capacity to export goods. This move represents a further escalation after several Chinese companies linked to Iranian shipping were added to a US sanctions list in May 2025.

Although China's domestic methanol production capacity is substantial, at approximately 110 million tons-accounting for over 60% of global capacity-it still relies on imports for around 15% of its supply. A critical dependency exists on Iran, which constitutes roughly 50-60% of China's total methanol imports, with proportions in certain months being even higher.

Consequently, the escalation of US sanctions, with market reactions intensifying from 13 October, is exerting direct pressure on China's methanol supply chain.

Regarding China's import profile, the country imported 8.24 million tons of methanol from January to August 2025, a 6% year-on-year decline. However, import volumes began a rapid recovery starting in August, with a single-month record high of 1.76 million tons. Earlier projections suggested imports for September and October would see a slight dip but remain above an average monthly level of 1.55 million tons.

Following the escalation of sanctions, reports indicate that some Chinese storage facilities have temporarily halted acceptance of Iranian cargoes. The actual volume of Iranian shipments that will arrive in Chinese ports now requires further assessment.

Concurrently, attention is focused on Iran's efforts to circumvent restrictions by transshipping cargoes through third countries such as the UAE and Oman. Imports from these nations surged significantly in 2023, but this route may also be obstructed following the latest sanctions.

Beyond sanctions, uncertainties in Iran's methanol supply are compounded by other factors, including its domestic natural gas supply-demand dynamics, which impact methanol production. With winter gas rationing measures imminent in mid-October, Iran's production rates are likely to decline, a factor expected to further exacerbate global supply tightness.