Iran-Israel war trigger Chemical Chain Reaction: Methanol Up, MDC & Acetic Acid Follow

Chemical Market Price

• Domestic methanol prices saw another sharp upward adjustment today, with importers raising quotes by ₹1/kg:
  a. ₹29.50++/kg Ex-Mumbai (60 days payment)
  b. ₹29.00++/kg Ex-Kandla (60 days payment)
• Traders quoted even higher rates at ₹30++/kg at both ports on similar credit terms.
• Week-on-week, methanol prices have risen by ₹6/kg—triggered primarily by escalating geopolitical tensions in the Middle East.
• On June 14, 2025, Iran’s South Pars gas field in Kangan (Bushehr province) was reportedly struck by an Israeli drone. The attack has severely disrupted Iranian methanol shipments and raised alarms across global petrochemical markets.
• This price surge has cascaded into downstream chemicals:
• MDC (Methylene Dichloride);
  a. ₹42++ Ex-Dahej
  b. ₹40++ Ex-Kurnool (Advance Payment)
• Acetic Acid;
  a. ₹38++ Ex-Mumbai
  b. ₹37++ Ex-Kandla (Advance Payment)

Demand and Supply Dynamics

Methanol Supply:

• The supply chain remains under intense strain due to the disruption of Iranian exports—a critical issue since Iran supplies ~65% of India’s methanol. This has led to widespread inventory building by buyers across sectors, fearing deeper shortages in July.

China’s Position:

• China is also affected, as it sources nearly 50% of its methanol imports from Iran. Given its role as the world’s largest acetic acid producer, disruptions in Iranian methanol flows could create global price volatility, especially in acetic acid markets.

Acetic Acid:

• While Indian supplies were ample until mid-June, the situation is changing rapidly. India depends largely on Chinese and Malaysian acetic acid, and with China facing upstream feedstock shortages, imports into India may shrink sharply by late June.

MDC Supply:

• In June, MDC availability reduced as key producers, including GFL, GACL, and SFR, operated below 50% capacity due to partial shutdowns.
• Earlier market oversupply, caused by Shreyas and SRAAC expansions, has now eased, restoring balance as western suppliers scale back production.

Buyer Sentiment:

• Inventory building is underway across all natural gas and toluene derivative segments. However, sellers remain firm, avoiding bulk commitments and sticking to spot deals as uncertainty looms.

Chemicals Market News

• A War-Driven Shockwave in the Petrochemical Value Chain. The drone strike on Iran’s South Pars—one of the world’s largest gas fields—has sent tremors across the global methanol industry. 
• For India, which relies heavily on Iranian imports, the situation is urgent. Buyers have responded by aggressively building inventories, fearing logistical blocks and vessel re-routings.
• China’s strategic vulnerability—as both a major methanol importer and acetic acid exporter—adds complexity. If Chinese production slows, prices of acetic acid, vinyl acetate monomer (VAM), and acetyl derivatives could face upward pressure globally.
• For India, the combined risk of disrupted Iranian shipments and tighter Chinese exports may create ripple effects across pharmaceuticals, paints, adhesives, and solvents sectors.
• Furthermore, natural gas volatility, port congestion, and rising ocean freight are compounding the risk. MDC prices are already reacting to supply-side cuts, with smaller manufacturers struggling to meet industrial demand.
• The broader message is clear: Petrochemical supply chains are being redrawn, and Indian stakeholders must act proactively to mitigate volatility.

Global energy markets continue to reflect heightened volatility:

• WTI Crude: ↓1.73% to $71.68/barrel
• Natural Gas: ↑2.77% to $3.67/MMBtu
• CFR China Methanol: ↑$10 to $320/MT
• FOB China Acetic Acid: Holding steady at $300/MT

Expert Opinion

• Methanol prices are expected to remain volatile and elevated in the near term, driven by:
  1. Disrupted Iranian exports
  2. Rising ocean freight costs
  3. Fragile downstream chemical balances
• Downstream products like Acetic Acid and MDC may continue to see sharp price corrections due to feedstock supply constraints. Buyers are advised to strategically build inventories before supply bottlenecks and freight hikes deepen in July.