Methanol and derivatives long-term supply and demand: Q3 26 update

Energy Aspects has updated its global supply and demand balances for methanol and its key derivatives, including formaldehyde, acetic acid, MTBE and MMA, through 2050. Our latest quarterly update lowers this year’s demand growth forecast and points to a Middle East supply squeeze that looks set to persist for longer than the market had hoped. 

How much is global methanol demand growing in 2026?

We now expect global methanol demand to grow by 1.2% y/y in 2026, a downgrade from the 2.5% y/y growth we had projected in our Q2 26 balances. Demand has broadly performed as we expected three months ago: Chinese consumption for methanol-to-olefins (MTO) and several major traditional derivatives is growing close to the country’s target range of 4.5–5.0% GDP growth for 2026. Scarcity of petrochemical feedstocks in Northeast Asia, excluding China, and in India has weighed on demand there, while allowing integrated China MTO (CTO) units to run at high rates and lifting demand for Chinese methanol production. We estimate global methanol demand at 114.5 Mt in 2026, accelerating to a 2.4% CAGR through 2030 to reach 126.7 Mt, led by growth in Asia.

Why is China’s MTO complex the key swing factor in this outlook? 

China’s MTO complex remains the single biggest swing factor for global methanol demand and trade. The country’s around 45% domestic demand share via MTO/CTO, combined with a still-large import requirement of about 15 Mt, makes Chinese import policy and pricing a key driver of trade flows. Despite the US–Iran conflict and the resulting sharp reduction in Middle Eastern methanol exports to China, increased domestic production and imports from Russia and South America helped satisfy Chinese demand through the first half of the year. 

What is happening to Middle Eastern methanol supply? 

The US–Iran memorandum of understanding, signed in mid-June, briefly allowed a glut of stranded Middle Eastern methanol to reach China, India and other destinations, appearing to resume previous trade patterns. But we continue to expect considerable limitations in Middle Eastern supply until there is a lasting resolution to Strait of Hormuz disruptions. Under this environment, non-integrated Chinese MTO units will idle or run at low rates, while CTO units continue operating at high, if somewhat reduced, rates as coal prices rise and demand softens approaching year-end. Middle Eastern methanol supply will remain constrained through Q3 26, and potentially longer, with all regional capacity and supporting infrastructure at risk of disruption until the Iran conflict is resolved.

How are demand trends shaping up in Europe and North America? 

We have revised down our European methanol demand growth forecast, and now expect less than 1% y/y growth in 2026, as higher inflation and elevated energy and methanol costs weigh on consumption in the second half of the year. In North America, we still expect demand to increase moderately, particularly from derivatives used in domestic oil and gas production. However, previous expectations of higher export demand for acetic acid, MTBE and biodiesel, where supply elsewhere is constrained by the Middle East conflict, have not fully materialised, due to production issues and limited demand for these products. Persistent inflationary pressure on raw material costs, including methanol itself, is also likely to limit North American demand growth in the second half of the year. 

What does the outlook look like beyond 2026? 

Methanol capacity expansions will slow significantly through 2030, with most additions concentrated in China, via integrated CTO, and the Middle East. We continue to expect tightening natural gas supply across major producing regions to constrain global capacity further, starting with the announced idling of Methanex’s 860 ktpa Titan unit in Trinidad and Tobago by end-Q3 26. Even so, recent Middle East developments increase the likelihood of at least one new world-scale methanol project being built by the end of the decade, with further longer-term additions expected in North America, albeit restricted by inflated construction costs. We expect previous demand trends to return by 2027 as global supply chains rebalance between Q4 26 and Q1 27, assuming Strait of Hormuz disruptions begin to ease by late Q3 26 and no significant unplanned production outages arise. Overall, our supply and demand outlook through 2030 continues to support methanol pricing moving towards sustained reinvestment levels, with any further reduction in Middle East supply likely to accelerate that pace.