[SMM Analysis] Hormuz Crisis: Methanol Supply Risks and the Rising Strategic Value of Green Methanol

A blockade in the Strait of Hormuz would cut off Persian Gulf oil and gas exports and cripple Middle Eastern methanol production at the source. As China relies heavily on Middle Eastern methanol, the conventional market would face a double shock from surging costs and supply shortages. Meanwhile, green methanol’s strategic value as an energy security "safe haven" will be revalued, supported by local supply chains and long‑term contracts.

I. Supply Chain Vulnerability

China’s methanol imports are highly concentrated in the Middle East, which accounts for 60%–70% of total inflows. Iran alone contributes nearly 40%–50% via transshipment despite sanctions. A Strait closure would not only halt shipping but also force Middle Eastern gas‑fed methanol plants to shut down, cutting off nearly half of China’s overseas supply.The Strait handles over 80% of Asian methanol imports. A shutdown would send vessel and insurance costs soaring, quickly turning tight supply into a full‑blown shortage.

II. Diverging Price Trends
Conventional methanol will face a squeeze from soaring gas costs and lost Iranian supply, with high prices likely to persist long after normal shipping resumes.Green methanol will outperform with greater stability. Fed by biomass or renewable power, it is decoupled from global oil and gas markets. Most projects use 5–10 year off‑take agreements, providing strong price resilience. As conventional prices spike, green methanol will become far more competitive, even turning cost‑effective under carbon pricing.

III. Strategic Security Shift
The crisis exposes the risks of an over‑concentrated supply chain. To improve security:Diversify imports away from the Middle East.Strengthen domestic production and build national strategic reserves.Scale up green methanol to create an independent, local, and controllable supply system.This is key to mitigating geopolitical risks and securing long‑term methanol supply stability.