Hydrocarbon Product Markets Surge Amid Middle East Conflict: Methanol Leads with Consecutive Limit-Ups

Methanol: THe Epicenter of the Crisis

Methanol has emerged as the most affected hydrocarbon product. On March 3, the main methanol futures contract hit its second consecutive daily limit-up, while plastics (LLDPE) and polypropylene (PP) also reached limit-up status.

Why Iran Matters for Methanol

Iran's role in global methanol supply cannot be overstated:

• Iranian methanol capacity: 17.39 million tons/year as of February 2026

• Share of Middle East capacity: 59.78%

• Share of global (ex-China) capacity: 22.86%

• Iranian urea exports (2024): Approximately 4.5 million tons, ranking third globally

With the Strait of Hormuz effectively blocked, both production stability and shipping lanes are compromised. Analysts from Industrial Securities note that "transport disruptions may lead to reduced import arrivals and fuel price expectations."

Price Impact

The methanol spot market has responded dramatically. As of early March, methanol prices surged by 12.97%, reflecting acute supply concerns. Downstream industries including formaldehyde, acetic acid, and MTBE are feeling the pressure, with formaldehyde prices now expected to trend upward due to unsustainable raw material costs.

LPG Market: CP Prices Rise, Imports Face Uncertainty

LPG (Liquefied Petroleum Gas) — encompassing propane and butane — is another hydrocarbon category facing significant disruption.

Price Trends

According to the Shanghai Petroleum and Natural Gas Exchange, for the week of February 23-March 1, 2026:

Saudi Aramco's February CP (Contract Price) settlements showed increases:

• Propane: $545/ton (+$20 from January)

• Butane: $520/ton (+$20 from January)

Supply Disruptions

The crisis has already triggered operational impacts. Saudi Arabia experienced a force majeure event halting March FOB loading, affecting approximately 400,000-500,000 tons of exports and triggering significant market bullishness.

Domestic Chinese LPG prices have followed suit. By March 4, civil-use LPG averaged 4,721 yuan/ton, up 142 yuan from the previous day and 345 yuan from end-February. Analysts expect further increases as supply gaps persist.

PDH Industry at Risk

The propane dehydrogenation (PDH) sector, which converts propane into propylene, faces particular pressure. With propane costs rising and downstream polypropylene prices struggling to keep pace, PDH margins are compressing rapidly.

Downstream Polymers: PP and PE Under Pressure

Polypropylene (PP) and Polyethylene (PE) markets reflect the broader tension between upstream costs and downstream demand.

Market Dynamics

• PP: While cost support remains strong, PDH-based and imported propylene-based PP production is experiencing deepening losses. March maintenance plans may be delayed, but operating rates remain low, creating supply contraction.

• LLDPE: Operating rates remain high, but supply pressure is building.

Inventory Picture

Post-holiday inventory accumulation was significant:

• Polyolefin inventories at major producers increased by 480,000-940,000 tons compared to pre-holiday levels

• Downstream resumption has been slower than expected, with agricultural film operating rates at just 10.1% and woven bag fabrication at 29.3%

However, the geopolitical crisis has activated restocking interest, with daily order volumes increasing notably in recent days.

Other Hydrocarbon Products: Broad-Based Impact

The crisis is affecting numerous other hydrocarbon-derived products:

Industry Response: Upstream vs. Downstream Divide

A Tale of Two Sectors

The crisis has created a stark divide in the chemical industry:

• Upstream producers: Profitability improved by rising product prices; maintenance plans delayed or canceled as production remains lucrative

• Downstream processors: Facing "triple pressure" of rising raw material costs, weak demand, and compressed margins; some small and medium enterprises delaying resumption

As one industry expert noted: "Upstream producers are unwilling to schedule maintenance due to strong profits, while downstream processors are afraid to resume production due to high raw material costs."

Stock Market Response

A-share chemical stocks have rallied strongly:

• Sector average gain: 2.13% on March 3

• Stocks hitting limit-up: Shaanxi Heimao, Guanghui Energy, Oriental Rainbow

• Baofeng Energy: 2025 net profit forecast up 73.57-89.34% year-on-year

Outlook: What to Watch

Industry analysts identify several key factors to monitor:

1. Duration of the Strait of Hormuz blockade and its impact on shipping

2. Iranian production stability amid conflict

3. Downstream demand recovery and ability to absorb higher raw material costs

4. Inventory destocking progress in China

5. March maintenance season — whether upstream units actually shut down

Near-term expectations: Prices for methanol, LPG, and related derivatives are expected to remain elevated, with volatility persisting as markets react to geopolitical developments.

Chengdu Hongjin Chemical: Your Partner in Volatile Markets

At Chengdu Hongjin Chemical, we understand that navigating today's hydrocarbon markets requires both expertise and reliable supply partnerships. Our product portfolio includes:

✅ High-purity hydrocarbon gases for industrial and specialty applications
✅ LPG products (propane, butane) with consistent quality
✅ Specialty gas mixtures for petrochemical process control and analysis
✅ Calibration standards for accurate composition monitoring

Whether you need feedstock gases, process intermediates, or analytical calibration standards, our team is here to support your operations through market volatility.

Contact us to discuss your hydrocarbon gas requirements or for the latest market intelligence.

This news compilation is based on publicly available market data as of March 5, 2026. Market conditions are subject to rapid change; please contact us for the most current information.