MEG supply to increase on new capacity

MEG prices have been in wide fluctuation and sentiment remained weak for a while despite strong fundamentals. In end March, MEG prices decreased rapidly due to the startup of Satellite Petrochemical's cracker. Lianyungang Petrochemical Co., Ltd (a company of Zhejiang Satellite Petrochemical Co., Ltd.) has fed ethane to its cracker in Lianyungang, Jiangsu province recently. The company is expected to get MEG products in mid-April. Lianyungang Petrochemical has two MEG production lines with total capacity of 1.8 million mt/year.

In coal chemicals, operating rate of coal to MEG units would increase further with the restarts of HNEC Puyang, Yangmei Pingding and Shanxi Woneng. Meanwhile, some conventional producers lowered EO output/raised EG output due to weakness in EO sales despite higher prices, which would contribute around 200-250 tons of daily output. China domestic MEG output would increase apparently since mid-April. April output is estimated at about 1.01-1.03 million tons.

Currently, Shaanxi Weihe Binzhou 300kt/year unit and Shaanxi Yanchang Petroleum 100kt/year unit are running stably, and the 400kt/year capacity would be included in CCFGroup MEG capacity database. There would be still around 3.5 million mt/year MEG capacity to come into the market in the second quarter of 2021.

In addition, syngas (coal) to MEG is more competitive with rising oil prices, and output loss due to negative cash flow would be lower than in the previous years. In supply-demand structure, China domestic output would be higher with new capacities coming into the market. However, imports would remain low and total MEG inventory would decrease slightly. In May, total MEG inventory will build up again with supply increase in both China and overseas market. Eyes could rest on startups of new capacities.