Market Review: October Volatility Intensifies. In the two trading days after the holiday, methanol became the most elastic commodity in the entire market. On October 8, the main MA2611 contract rose steadily after the open and hit the daily limit, up 300 points or 9.02% from the pre-holiday settlement price of 3,325 yuan/ton. On October 9, the rally continued, with the main contract once rising more than 9% in early trading and touching an intraday high of 3,959 yuan/ton, a new stage high, before closing at 3,835 yuan/ton. Trading volume expanded to 2.9263 million lots, but open interest fell by about 88,000 lots that day to around 454,000 lots, showing a "volume up, positions down" pattern as bullish profit-taking sentiment warmed.
On October 12, the market turned sharply lower, with the main contract opening lower and weakening continuously, closing the morning session at 3,523 yuan/ton, down 296 yuan/ton from Friday's settlement price, while the 2610 contract hit the daily limit down. The spot market had already weakened before the futures plunge. According to Longzhong Information, on October 9, Taicang imported methanol spot closed at 4,832 yuan/ton, up about 382 yuan/ton from before the holiday and a nearly five-year high; Ordos North Line was 3,970 yuan/ton, and Shaanxi Guanzhong was 3,872 yuan/ton. But during the futures market holiday on October 10, spot prices fell noticeably. Under Longzhong's measure, Taicang spot dropped to 4,600 yuan/ton, down 232 yuan/ton from the previous trading day, port negotiations saw average trading, and the inland spot auction failure rate rose sharply. On October 12, Taicang spot fell another 500 yuan/ton to 4,100 yuan/ton. The spot decline showed weaker downstream acceptance, dragging the futures market sharply lower and rapidly repairing the basis.
The main drivers of this short squeeze surge were threefold: first, during the National Day holiday, attacks continued in the Strait of Hormuz shipping lane and Iran announced a blockade, concentrating the geopolitical risk premium from Middle East conflict; second, port inventories hit a record low and spot prices were high, giving the main contract a convergence driver toward spot after switching to a continuous near-month contract; third, warehouse receipts tightened and shorts lacked supply, strengthening the market's short-squeeze sentiment. The reasons for the joint decline in futures and spot from the weekend to now are concentrated in the following: first, over the weekend Bohua and Levima Advanced Materials shut down, Chengzhi planned to cut load on the 15th and shut down on the 18th, coastal MTO was nearly fully shut, and inland auctions saw widespread failures, turning negative feedback from expectation into reality; second, geopolitical premium gave back, with the United States announcing a Russia-Ukraine "energy ceasefire" over the weekend and a senior Iranian official saying the United States had accepted some Iranian conditions for reopening the Strait of Hormuz, cooling Middle East tensions and weakening market sentiment; third, the sharp rise was unsustainable, and after continuous surges the market was severely overbought, with profit-taking demand alone enough to trigger a correction.
Fundamentals: Demand Negative Feedback Materializes
1. Supply: Domestic Operating Rates Return to Historic Highs; Import Hard Gap and Winter Gas Restrictions Await Verification
Domestically, maintenance units restarted in clusters after the holiday, and operating rates have reached historic highs. According to Longzhong Information, as of the week of October 9, China's methanol plant capacity utilization rate was 92.28%, up 2.77 percentage points week on week and up 2.74 percentage points year on year, with weekly output of 2.0849 million tons, up 51,300 tons from the previous week. Previously maintained units including Yulin Kaiyue, Inner Mongolia Rongxin, Inner Mongolia Xinao, Gansu Huating, Hebi Coal Chemical, and Shanxi Coking all restarted gradually from late September to early October, involving more than 3 million tons/year of capacity. With methanol prices high, corporate profits were substantial and operating enthusiasm was strong. In mid-October, Shanxi Jinmei Huayu's 1.2 million tons/year unit will provide limited offsetting.
In the medium term, Ningxia Baofeng Phase IV's 2.8 million tons/year unit may produce qualified methanol in mid-to-late October and olefins in late December, with plans to sell methanol externally in the initial startup period, while Liaoning Huajin Aramco's 400,000 tons/year unit is expected to start production in November. At the current operating rate above 92%, subsequent upside for domestic production is already limited, but if new capacity is added there is still some room for improvement.
Overseas, the cliff-like contraction in imports remains the bulls' main logic. According to Longzhong Information, September methanol import foreign vessel actual discharge was 426,400 tons, plunging 47.05% from 805,300 tons in August, and October is expected to fall further to around 345,400 tons due to a sharp drop in non-Iranian arrivals. On the unit side, as of the week of October 9, international methanol operating rate was 49.03%, down 2.78 percentage points week on week, with Brunei in Southeast Asia shut down and Iran's Marjan and Apadana possibly shut due to tank topping. Although operating rates are low, the current overseas supply problem remains concentrated in transportation rather than production. Middle East floating storage accumulated about 660,000 tons (Kpler basis, September 29). If passage through the Strait of Hormuz eases, overseas floating storage could rush out and the market could repeat June's行情. It is necessary to watch whether Iranian winter gas restrictions can take over as a new bullish support. Since winter gas restrictions began in 2019, Iranian methanol units have generally shut down gradually from mid-November. In 2025, due to higher temperatures and foreign exchange needs, this was delayed to late November. Even if the strait eases in November and Iranian units intend to restart, gas restrictions will become a new hard constraint immediately replacing conflict-related reductions, and fourth-quarter import elasticity will remain weak. It should be noted that after the March geopolitical conflict, Iranian units have long been at low load, so the "incremental reduction" from seasonal gas restrictions has already been absorbed in advance by geopolitical reductions, and there is floating storage at port. Based on this logic, trading should pay attention to changes in pace.
2. Demand: Coastal Outsourced MTO Nearly Fully Shut, Negative Feedback Strengthens
MTO is methanol's largest downstream demand. According to Longzhong Information, CTO/MTO unit capacity utilization was 79.69%, while MTO units in Jiangsu and Zhejiang, which mainly rely on outsourced supply, saw average weekly capacity utilization fall to 20.06%. Negative feedback at the unit level accelerated: Tianjin Bohua and Levima Advanced Materials shut over the weekend of October 10-11, Nanjing Chengzhi Phase I and Phase II plan to cut load on October 15 and shut on October 18, and Ningbo Fude's restart after September 19 maintenance is pending. Coastal outsourced demand is close to a rapid decline. Losses are the root cause of shutdowns. According to Longzhong Information estimates, in the week of October 9, theoretical profits for outsourced MTO deteriorated to more than -4,000 yuan/ton. Squeezed between high-priced feedstock and relatively small polyolefin gains, passive shutdown was an inevitable choice for companies.
On the CTO side, northwest olefin enterprises purchasing methanol externally provide support for inland spot. Attention should be paid to the time mismatch between Baofeng Phase IV's 2.8 million tons/year new unit and the commissioning of its supporting units. During the period, it plans to sell methanol externally, which may increase domestic supply, but the current arbitrage window between port and inland prices after deducting logistics has not fully opened, so the impact on the coastal market is limited. Traditional downstream sectors are generally stable but weak. According to Longzhong Information, acetic acid capacity utilization was 83.63%, the highest among traditional downstreams; MTBE capacity utilization was 61.27%, but some MTBE units at independent Shandong refineries plan to shut after cutting load due to feedstock shortages; formaldehyde capacity utilization was 30.37%, still in the off-season range; dimethyl ether capacity utilization was 7.20%, long at a historic low. The "Silver October" peak season is lackluster. Under high prices, downstream players are generally watching and mainly purchasing on a need-only basis, making it difficult to absorb the demand gap created by olefin shutdowns.
3. Inventories: Port Inventories Hit Record Low, Tradable Supply Drops Sharply
According to Longzhong Information, as of October 8, total methanol port inventories in China fell to 305,100 tons, down 88,400 tons from September 30, down 22.47% week on week and down 80.23% year on year, continuing to set a record low. Tradable supply in coastal areas is estimated at only about 105,000 tons, meaning any marginal restocking demand will trigger price spikes, and any supply-side contraction will be sharply amplified. Therefore, even if current futures and spot prices have fallen noticeably, the inventory turning point has not appeared, and methanol may still have room to surge. Producer inventories, meanwhile, turned to accumulation amid supply recovery. According to Longzhong Information, sample producer inventories were 321,200 tons, up 38,700 tons month on month, an increase of 13.72%. This was partly due to recovering domestic supply and partly due to restricted transportation of hazardous chemicals during the holiday. Whether inland supply is saturated and how strongly downstream can absorb it requires continued attention to producer inventory data this week.
4. Costs: Coal Prices Continue to Surge but Support for Methanol Is Limited
Methanol surged sharply, and profits under all production methods were substantial, leaving cost support relatively limited. According to Longzhong, under winter stocking demand, Yulin pithead and northern port thermal coal prices were stable to firm, with Q5500 Ordos thermal coal maintained around 715-730 yuan/ton, and port coal prices broke above 1,000 yuan. But because methanol prices rose sharply, upstream coal-based profits expanded to absolute highs, meaning operating enthusiasm is at its strongest and production cut risk is extremely low. The role of higher feedstock prices on the cost side is to limit declines rather than drive gains.
5. Geopolitics: Actual Strait Passage Remains the Biggest Disturbance
Geopolitics remains the first variable in methanol pricing. During the National Day holiday, Iran announced a blockade of the "illegal lane" in the Strait of Hormuz and entered a state of "full-scale war." Attacks on the lane and shipowners' risk aversion left actual strait traffic at only about 18% of pre-war levels, with fewer than 20 ships passing per day, directly suppressing Middle East shipments. Since October 10, easing signals have been密集: on October 11, Trump announced a Russia-Ukraine "energy ceasefire"; Iranian Foreign Minister Araghchi proposed a "seven-day plan" to reopen the strait, which if adopted could allow a substantive reopening within a week; Iranian Supreme National Security Council Secretary Rezaei said the United States had accepted some conditions for reopening the strait but that the "effort was insufficient" and further clarification was needed; the United States simultaneously imposed new sanctions on Iran involving 17 transport vessels, estimated to leave about 20 million barrels of Iranian crude stranded at sea, and stated it would not take military action against Iran before the November 3 midterm elections. Overall, the geopolitical premium is shifting from "one-way expansion" to a "two-way digestion" phase. A substantive reopening of the strait is the core switch for falsifying the bullish logic. Once the 660,000 tons of floating storage is released, port inventories could be pushed back from the 300,000-ton level to the 700,000-ton level within weeks. But if the "seven-day plan" fails or the conflict escalates again, the premium will expand anew. In addition, VLCC freight rates have risen to the highest in 60 years, and war-risk insurance premiums are elevated. Even if a ceasefire is reached, the shipping recovery path itself will not be smooth.
After the Short Squeeze Spike, Premium Fades; Negative Feedback and Inventory Turning Point Determine the Pace
After returning from the National Day holiday, methanol fluctuated sharply, with the market quickly switching from the concentrated realization of overseas geopolitical risk premium during the holiday in the first week after the holiday to negative feedback on the demand side. From a fundamental perspective, the bulls' logic has not collapsed: port inventories at a record low of 305,100 tons, coastal tradable supply shrinking sharply, and October foreign arrivals continuing to decline mean supply-side constraints remain. But all of the above are "stock information." The increase in MTO shutdowns over the weekend and the cooling of international geopolitical conflict have made deeper negative feedback on the demand side and the giveback of geopolitical risk premium the new trading mainline. Combined with recovering domestic supply, the bearish logic has strengthened. In addition, last week futures and spot rose together, the deviation rate rose sharply, and the market was overbought, so bulls themselves had profit-taking incentives. What to watch going forward is the game between the import gap and demand negative feedback, and whether recovering domestic supply can change the current tight supply-demand situation. This week, the market is expected to be weak first and then stabilize, with single-day amplitude possibly frequently exceeding 3%, and panic sentiment releasing marginally after sharp declines. For the full month of October, wide-ranging volatility is expected. The "strong near-month" logic around MA2611 entering the delivery month in late October will still dominate at times. If spot prices rise again, delivery博弈 may intensify again, and the possibility of prices rising above 4,000 yuan/ton cannot be ruled out. Given large one-way fluctuations, focus on short-term spread trading and watch MA10 support. Trend positions should wait for a clear port inventory turning point or a signal of actual strait passage before entering. In arbitrage, the near-strong, far-weak structure is unchanged, so maintain a positive spread approach, but pay attention to timing. For reference only. Chang'an Futures: Zhang Chen, October 12, 2026.
Comments