2025 Review and 2026 Outlook of the Methanol Market in China

January 15th, News

Introduction: Methanol is a colorless, clear liquid. Its vapor can form an explosive mixture with air, and it produces a blue flame when burned. Methanol is miscible with water, ethanol, benzene, ketones, and other organic solvents. The vapor of methanol forms an explosive mixture with air, which can ignite and explode upon contact with open flames or high heat. The monitored methanol grade is premium quality.

In 2025, China’s methanol market will face a pronounced supply-demand imbalance due to increased supply, import pressure, and weak demand, resulting in volatile price declines throughout the year. Under the global “dual-carbon” goals, the rapid deployment of green methanol is introducing new variables into the industry’s long-term development. This report reviews the 2025 market from the perspectives of prices, supply and demand, policies, and the external environment, and provides a forecast for 2026 trends.

I. Core Performance of the Methanol Market in 2025: Prices Show Volatile Declines, with a Weak Trend Persisting Throughout the Year

(1) In 2025, the methanol market will remain weak, with prices shifting downward and occasional fluctuations failing to reverse the overall downward trend.

Overall Trend: Volatile Decline with Significant Intra-Year Fluctuations

Analysis of the system monitoring data shows that the price of methanol in 2025 followed a "first decline, then fluctuation, and finally bottoming out" trajectory. The highest point of the year was reached in mid-March (driven by pre-holiday stockpiling), and the lows were hit in early June and late November (affected by the off-season and peak import inventory, respectively). By the end of the year, the average spot price had fallen by more than 15% compared to the beginning of the year, reaching the lowest level in the past three years, putting continuous pressure on the industry's profitability.

(2) Volatility Logic: Short-term Factors Cause Disruptions, Long-term Supply and Demand Dominate

Throughout the year, prices experienced several short-term rebounds driven by phased events such as the Israel-Israel conflict, adjustments to coal supply assurance policies, and seasonal inventory buildup. However, due to the lack of sustained momentum and the overlapping core contradiction of supply-demand imbalance, prices quickly fell back after these rebounds, failing to trigger a sustained trend reversal.

II. Analysis of Core Driving Factors: Imbalance in Supply and Demand is the Core, with Policies and International Situation as Supporting Variables

(1) Supply-Demand Dynamics: The supply side is experiencing dual expansion, while the demand side lacks strong support.

Supply and demand imbalance is at the core of market weakness, with a stark contrast between the supply side's "increased capacity + increased imports" and the demand side's "traditional weakness + insufficient new demand" in China.

1. Supply Side: High Production Capacity and Imports, Severe Oversupply

In 2025, China's total methanol production capacity will reach 108.045 million tons per year (a year-on-year increase of 5%). The newly added capacity will be concentrated in the coal-to-methanol sector in the northwest region. The average annual operating rate of coal-to-methanol plants is 80%, while that of natural gas-to-methanol plants is 49%. Overall industry operating rates exceed 78%, ensuring ample production supply.

Import volume is expected to reach 14.28 million tons (up 5.9% year-on-year, hitting a new historical high). In the second half of the year, overseas supply surged, causing port inventories to accumulate and peak at 1.674 million tons by November, strongly suppressing spot prices.

2. Demand Side: Traditional Sectors are Weak, Emerging Sectors are Still in the Development Stage

The core downstream MTO industry, affected by inverted polyolefin profit margins, has seen long-term losses at externally sourced facilities and low operating rates. Demand growth in traditional downstream sectors such as formaldehyde and acetic acid has slowed, prompting small and medium-sized enterprises to reduce production, thereby weakening methanol consumption capacity.

Emerging demand for methanol fuel and commercial vehicles is gradually being unleashed, but due to its small scale and constraints imposed by standards and supporting infrastructure, it cannot yet offset the shortfall in traditional demand in the short term.

(2) Policies and the External Environment: Green Transformation Accelerates, International Situation Exhibits Moderate Disruptions

1. Policy Environment: Dual Carbon Goals Drive Transformation, Traditional Industries Face Pressure

China's "dual carbon" goals are driving the layout of green methanol, with multiple regions introducing supportive policies. However, traditional coal-based and natural gas-based methanol still account for over 95%. Coal supply guarantees and environmental production limits affect the cost and supply stability of traditional methanol, increasing profit pressure.

2. International Situation: Global Supply is Loose, with Short-Term Geopolitical Disruptions

Global methanol supply is loose, and low international prices are dragging down China. The Israel-Iran conflict and Iranian plant maintenance have caused short-term disruptions to import volumes, but they have not changed the overall situation, and their impact has been limited and brief.

III. 2026 Market Outlook: Short-term Phased Rebound, Long-term Structural Reconfiguration Expected

(1) Short Term (Early 2026): With import contraction coupled with inventory depletion, prices may experience a temporary rebound.

In early 2026, Iran’s winter maintenance will lead to a contraction in imports. Coupled with the resumption of downstream operations after the Spring Festival, port inventory pressures will ease, and supply-demand dynamics will improve marginally, potentially triggering a temporary rebound in prices. However, the magnitude of this rebound will be constrained by the recovery of MTO profits and the strength of the revival in traditional demand, leaving prices still in a low-level range with ongoing fluctuations.

(2) Long-term: Green methanol accelerates its rise, gradually reshaping the industry landscape in China

In the long term, the capacity planning for green methanol is increasing, but the commissioning progress is slowing down. Traditional methanol will still dominate in the next 2-3 years. With technological advancements and cost reductions, the application potential of green methanol in shipping and new energy vehicles will be released. Coupled with the pressure from the EU's CBAM policy, it will become a core sector. High-cost traditional facilities will be phased out at an accelerated pace, leading to increased industry concentration. The industry structure will evolve towards "green, high-end, and centralized."

IV. Summary

In 2025, the core contradiction in the methanol market was the imbalance between supply and demand, leading to a downward trend in prices. In 2026, there may be a short-term improvement due to reduced imports and inventory depletion, but the industry is still in a transition period from phasing out traditional capacity to nurturing green capacity. In the future, the breakthrough and application expansion of green methanol technology, as well as the strength of the recovery in traditional demand, will determine the evolution of the market structure, as the industry moves toward a new pattern of green transformation.