MEG prices stabilizes after decreasing

MEG prices stabilized Tuesday owing to the policy support, sales promotion of polyester, suspending MEG cargo loading from Zhenhai terminal and narrowing margins.

Chemical commodity futures stabilized Tuesday after the RRR cut of PBOC.

Ningbo initiated a level 1 emergency response on December 7, 2021. Zhenhai District implemented temporary lockdown measures and the entire district organized large-scale nucleic acid testing, including a detection point in the site of Zhongjin Petrochemical.

There are two MEG units in Zhenhai, Ningbo: Fund Energy and Sinopec Zhenhai Refining & Chemical (ZRCC).

Fund Energy is conducting planned maintenance at its 500kt/year MEG unit; ZRCC is now running its 650kt/year MEG unit at around 70-80%. The company may lower operating rate as EO loading was affected. The MEG cargoes of ZRCC are mainly sold to polyester plants in Xiaoshan and Shaoxing, Zhejiang province. Meanwhile, MEG loading in Zhenhai terminal has been also stopped due to the restriction.

Hangzhou has reported three cases. And focus could be rest on polyester product transport in Xiaoshan District, Hangzhou. Currently, MEG stock of polyester plants in Xiaoshan and Shaoxing was around 1 week. The impact of the new cases on MEG demand is limited right now.

It is reported that although current production of Ningbo polyester plants has not been affected, its polyester raw material transport is impacted, not ruling out future production to be affected. CCFGroup will follow up it later.

MEG margins are poor right now. Some MEG producers, such as Sanjiang Chemical, Satellite Petrochemical have raised EO output. Startup of the second line of Zhejiang Petroleum & Chemical has been delayed. Operating rate of coal to MEG units remains low. And some units which were shut doe to poor economics have no clear timing to restart.

In medium to long term, MEG inventory will gradually increase in the coming 2-3 months. Meanwhile, port inventory will gradually increase as well. The upward momentum of MEG prices is weak.

Related news about RRR and relending rate cut:

China's central bank said Monday it has decided to cut the reserve requirement ratio (RRR) for financial institutions to support the development of the real economy and reduce the comprehensive financing cost. The ratio will be cut by 0.5 percentage points, effective on Dec. 15, except for those financial institutions that already implement a 5-percent RRR, said the People's Bank of China (PBOC) in a statement. After the reduction, the weighted average RRR for Chinese financial institutions will stand at 8.4 percent, the central bank said. A total of 1.2 trillion yuan (about 188.4 billion U.S. dollars) in long-term funds will be released through the cut. China's central bank on Tuesday announced that it has decided to lower relending rates for the agriculture sector and small enterprises by 0.25 percentage points starting from Dec. 7. After the reduction, the interest rates of three-month, six-month, and one-year reloans supporting the development of agriculture and small firms stood at 1.7 percent, 1.9 percent and 2 percent, respectively, the People's Bank of China (PBOC) said in an online statement.