Amid continued tightening in the Middle East methanol market due to geopolitical conflicts, Saudi Basic Industries Corporation (SABIC) has taken a key step forward in its expansion plan.
On September 3, SABIC's joint venture, Saudi Methanol Company (AR-RAZI), officially received approval from Saudi Arabia's Ministry of Energy for the allocation of feedstock for its new methanol facility at the Jubail Industrial City. The plant is planned to have a capacity of 1.8 million metric tons per year. SABIC stated that it will subsequently disclose major information, including the final investment decision (FID), based on progress.
Existing Capacity of Approximately 4.05 Million Mt/Year, New Project to Boost by 44%
AR-RAZI is 75% owned by SABIC and 25% by Mitsubishi Gas Chemical of Japan, and currently operates approximately 4.05 million mt/year of methanol production capacity at Jubail, with its fifth unit, about 1.7 million mt/year, commissioned in 2008. If the 1.8 million mt/year new unit is ultimately realized, AR-RAZI's total capacity would rise to approximately 5.85 million mt/year, an increase of 44%.
SABIC clarified in its announcement that this project is not an entry into a new field, but rather an expansion of its existing methanol business, aimed at strengthening its production portfolio and aligning with the company's strategic direction of focusing on core businesses and reinforcing fundamentals.
Middle East Supply Contracts, Methanol Market Continues to Strengthen
The project approval comes at a time when Middle East methanol supply is experiencing significant disruptions. Due to recent escalations in geopolitical conflicts and heightened risks to shipping through the Strait of Hormuz, multiple units have been forced to reduce load or shut down. Currently, about 62% of methanol facilities in the Middle East are offline, with only about seven units still operating in Iran, and daily output falling to 20,000–25,000 mt.
The sharp supply reduction quickly fueled market concerns, with Asian buyers intensifying expectations of tighter Middle East supply. China's methanol futures rallied in response, with the main contract hitting the limit-up on September 8 and continuing to rise over 6% in early trading on September 9.
The supply tightening has tangibly transmitted to imports and inventory levels. Actual methanol arrivals to China this week totaled only 149,200 mt, down 23.45% month-on-month. As of September 2, major coastal port inventories stood at 641,500 mt, a year-on-year drop of over 55%.
Spot prices have also strengthened. In early September, China CFR methanol quotes had risen to $404–412/mt, while India CFR quotes reached $505–515/mt. The basis between Taicang spot prices and the main futures contract once widened to 190–210 yuan/mt, reflecting the tight near-term supply-demand pattern.
Saudi Expansion Accelerates, Incremental Supply Awaits Release
Against the backdrop of current supply gaps and elevated prices, the awarding of feedstock quotas to this large-scale Saudi methanol project has refocused market attention on the Middle East's future incremental supply capacity.
Saudi Arabia is a major global methanol production and export hub, with Jubail as a core petrochemical base. AR-RAZI already has a mature large-scale production system and supporting infrastructure, and the new project is a capacity expansion rather than a greenfield development. Once the 1.8 million mt/year increment is released, it will command a considerable share of the global market, particularly providing significant supplementary supply for import-dependent Asian countries.
