How are market dynamics shaping up for methanol in the US and globally?

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Andre Mikhail:

We've had this remarkable shift of trade flows in the East coast that is primarily result of the tariffs on Trinidad and on Venezuela.

Vincent Valk:

Hi, and welcome to the Chemical Week Podcast. I'm Vincent Valk. Our guests today are Kamna Kapoor, Senior Price Reporter at S&P Global Platts and Andre Mikhail, Price Reporter at S&P Global Platts. We're going to talk a little bit about recent developments in the global methanol trade. I'll hand it off to Kamna now, who is our resident expert on this subject.

Kamna Kapoor:

Hello everybody. Hi Andre. I have been hearing there are a lot of developments in the Americas methanol market and I was quite interested to know about the recent demand and supply fundamentals in the Americas. Would you like to touch upon that a bit?

Andre Mikhail:

Sure thing, and there is a lot going on, although I imagine a bit less than in India, which we'll get to later. But for the Americas where we've seen the primary changes have been in South America, specifically in Brazil. Our understanding is that the main entrant into the Brazilian import market this year has been Russia, which is fairly unprecedented. There were small volumes coming in before, but we're told that there is anywhere between 17 and 34 kt of Russian methanol coming into Brazil on a monthly basis. This is primarily at the Port of Paranaguá and we're told that it's leaving the Baltic coast of Russia, some say St. Petersburg.

Now, the reason for that is pretty clearly Western sanctions and the fact that Russia is looking for new export markets. They're much more reliant on places like Brazil, which is firstly a part of the BRICS Trade Alliance, but it's also one of the few methanol markets globally that continues to grow because of its biodiesel consumption. So there's about 100 kt per year of methanol demand for every increase in the biodiesel blend mandate that Brazil has. So what we've seen is that Russia have been pretty aggressive in pursuing that growth because there aren't a lot of other options for them, and the methanol is entering Brazil at very competitive prices.

Kamna Kapoor:

That's quite interesting. So how are contract discussions shaping up right now?

Andre Mikhail:

Very good question. Very relevant one. The primary contract negotiations are happening in the US and in Trinidad. These are being guided primarily by Methanex and Valenz of course who are the two primary producers. But what we're also seeing is contract renegotiations in Trinidad between Methanex Valenz and Mitsubishi, who are the three main players there and the Trinidadian state. The trouble is that there has been very inconsistent gas production in Trinidad and Tobago this year and for the last few years. That's expected to continue in 2026 and on to 2027. So the Trinidadian state are in a position of deciding where to allocate that gas.

Now, there are other gas derivatives producers on the island, mainly nitrogen, ammonia, fertilizers, and LNG. The margins on some of those products are much stronger than for methanol. So what we are seeing is a decrease in methanol production out of Trinidad because they're prioritizing some of those other more profitable derivatives. There are contract negotiations happening between Proman and Trinidad and then Methanex and Trinidad over the course of the next eight to nine months. The expectation is that the Trinidadian government are going to play pretty strong with it. They have the leverage and they know that some of these other products just make more money. So there is a significant chance that we're going to see a shift in trade flows as a result of that and as a result of some of the, we'll say, changes that we've seen in the acquisition space in the US.

Kamna Kapoor:

I see. That's pretty interesting. Usually by when these contracts are concluded, so for the Asian market, I think typically it has already begun and most of the contracts get concluded by the start of the following year. So by early 2026.

Andre Mikhail:

Yes. I believe we're looking at a similar timeline for the US. I think January, February at latest is when most of those are going to be resolved. In the case of Trinidad, it's a bit less formulaic, a bit less predictable, and I really think that's going to come down to how much leverage the producers have and what sort of existing relationships there are between the competing producers and the Trinidadian state.

Kamna Kapoor:

I see. So coming back to the spot market, how is the current inventory situation in the US and how is the demand shaping up right now?

Andre Mikhail:

I would say supply is healthy in the US. It has remained so all year. It was a difficult year for construction and for coatings, primarily because of the tariff situation that we're all very familiar with. But also because we've had this remarkable shift of trade flows in the East Coast that is primarily a result of the tariffs on Trinidad and on Venezuela. Then because a lot of these export arbitrages are less and less competitive for US sellers, we're seeing much more competition within the domestic market. So truck and rail pricing has been very, very near barge pricing for a long time. There should be a premium there, but there isn't because it's very difficult to move this stuff, and so they're having to sell at low prices. We are seeing things like extended turnarounds, derivatives, producers not really having an impact on methanol pricing.

There's been a slow downtick in prices over the course of the last month that you would typically expect for Q4. But what is interesting is that whereas a lot of year-end de-stocking would have been exported in years past, there's less arbitrage for that now, and so we're seeing a pretty significant supply glut and a lot of that going either to Europe per usual, in some cases to South Korea, although that's a much less compelling arbitrage. Then increasingly US sellers are trying to export to Brazil, but as I said, they're having to deal with very competitive other exporters at this stage.

Kamna Kapoor:

I see. That's interesting. I think coming back to the point of change in rate flows, Asia in itself also is actually looking at a massive shift in the trade flows. I here would touch upon specifically the Indian market where we are seeing tightening of the US sanctions impacting the traditional flow of methanol out of the Middle East to Indian market. Indian market used to import a lot of methanol from Iran. So the imports were totaled around 2 million metric tons during the year 2024 from Iran, which meant 68% of its total demand. However, if you look at the stats between Jan to September 2025, there's a sharp slump in the volumes we have imported from Iran. It's about 0.5 million metric tons. So there's a slump in the import volumes from Iran. One of the major factors behind that is the tightening of US sanctions.

The US released the first list targeting five Indian chemical importers on July 30th, and the second list was out much ahead of time than expected, so on October 9th and it targeted eight more Indian chemical companies that were involved in methanol trading. So this meant more than 70% of the Indian methanol trading fraternity was under sanctions. It's actually under sanctions now. There are limited non-sanctioned left in the Indian market.

So the ripple effect of all this is in the prices. Indian prices spiked to as high as $350, the highest globally in mid-October, but they slid back to $315 levels in mid-November. But then again, the prices are well above the Chinese prices. Chinese prices are hovering around 232 to $235 right now. The India and China gap has moved much wider over this period. So India-China gap has moved higher than $50. So currently it stands at around $82. So with that India-China arbitrage is open. China has been very actively selling spot cargoes to India. That's traditionally not been a flow we have seen in the Asian methanol market. Middle East used to be the net supplier of methanol to India, but we are seeing new entrants into this market. We are seeing Malaysia, Japan and China actively looking to place spot volumes in India.

Andre Mikhail:

That's very interesting actually. And are you seeing that there's a shift away from Iranian imports to let's say Saudi Arabian or other Middle Eastern options or is it primarily Southeast Asia and Northeast Asia that are stepping in?

Kamna Kapoor:

No, no, of course because of its proximity in terms of location, Middle East would always be the first priority of India when it comes to methanol demand. But when it comes to the prices, of course, if China is able to offer better prices, India would want to buy from China. At the same time, voyage from China is longer compared to the Middle East. Middle East would take at least a week of sailing time while China would take possibly more than 20 days. So of course the priority would be a Middle Eastern supply, but at the same time the price, if it is well competitive because Chinese offers were quite competitive in the Middle East. Then of course things changes and there is the flow from China to India. At the same time, Malaysian supply, it used to be more consistent in the eastern part of India and East coast prior to the sanctions. But now after Indian prices become very lucrative, we have seen the Malaysian producer are quite actively seeking port opportunities in the Indian market.

Andre Mikhail:

Given that China has entered the Indian market more consistently now, is there any relevance to the weakness of domestic consumption in China to the weakness of MTO demand somehow playing a factor in the prices in India?

Kamna Kapoor:

So if you look at the Chinese prices, there's a lot of course major movement and very attractive prices in the Indian market. However, if you look at the Chinese prices, they are very depressed. One is because of the demand. The other factor is the inventory. So Iranian flow has actually shifted more towards the Chinese market now because Indians have stopped buying Iranian product. That is one of the reasons why Chinese inventories are swelling. So right now it's about 1.5 million metric tons. Tanks are full in China and prices have dropped to the levels of June 2023. So that is one of the reasons why Chinese prices are falling. Also, the demand. So [inaudible 00:11:35] demand is not really performing well. So in general, demand fundamentals in China are not really great.

Andre Mikhail:

I would agree. It also seems as though we would expect some change in trade flow out of Iran given that they're less able to export to India given that China's already pretty long. So where do you see those volumes being redirected

Kamna Kapoor:

For now, I'm hearing that they're focused on the Chinese market. Eventually we may see them exploring other outlets, but at the same time I'm hearing we are heading towards winter months, typically when Iranian plants cut down run rates or they stop production because of diversion of natural gas into room heating. So this period usually has lesser port availability from Iran. So we are anyways heading towards that period when prices are higher due to shortage of supply from Iran. I think there would be more visibility on where this Iranian flow goes over the course of time. But for now, I think the focus is Chinese market. That's what has actually pressured the prices in China. Also adding here, so India is not just witnessing the change in trade flow. It is also witnessing the pattern in which there used to be trading. So now Middle East producers are actively seeking advanced payments instead of LCs.

So LC, letter of credit, was the standard payment term they used to follow before the sanctions were in place, but now everybody are reducing their credit limits. Also, there is emergence of new traders in the Indian methanol market because majority of the traders are under sanctions now and there are more number of traders applying for methanol license, which I think which takes about six months. But we are seeing that there are new names. New companies want to enter into methanol trading business. I think Indian methanol market would be very interesting for the coming months.

Andre Mikhail:

I would agree. It's been a lively year for India and for global trade generally. One thing I am hearing pretty consistently is that a lot of 2025 was spent just waiting for these tariffs to settle and figure out. Okay, we know that trade flows are going to shift, we know that the market's going to adjust, but in what way and what are these final levies going to be? We now have a clearer picture of that and so people are able to make more informed decisions about spot and contract business. So let's just say for India, for Southeast Asia, this part of the world, next year, how do you see these levies impacting trade flows? We'll just say for the first half of next year.

Kamna Kapoor:

So I think India in itself, it is still not a very stable market. It's very dynamic, very volatile right now. If you look at the price graph, it's actually there are peaks and troughs, and every week it's up or down, not just the international markets but the domestic market. It's all because of the uncertainty around the Iranian flow. So there are still discussions, there are still chatters in the market whether Middle Eastern volumes would remain similar to the previous year or would they reduce coming into 2026. Of course the expectations are that there would be lesser or minimal flow from Iran in the following year. But it's still an uncertain phase for the Indian methanol market.

I'm hearing that making contract decisions is all the more difficult now because I heard that producers' expectations, of course non-sanctioned producers are expecting double the premium they charged for 2025 because they're well versed with the Indian market situation. Everybody knows that there is risk in buying from Iran, and supply security is something that everybody, most of the end users would watch out for. The indicative premiums are higher from the producers. At the same time, end users are reluctant and they are a bit resistant to pay higher premiums because they're not very sure though about the price reduction. So for now they are not very convinced and it's very uncertain how the market outlook would be for 2026. But the first half of 2026 looks in a similar fashion. It is looking very uncertain right now.

Andre Mikhail:

As you said, there are a lot of variables in the air, but fortunately we have you to cover them. So thank you so much for the update, Kamna.

Kamna Kapoor:

Thank you so much, Andre.

Vincent Valk:

Great. Thanks to Andre and Kamna for joining the podcast. This is Vincent Valk signing off for Chemical Week.