MEG: a long road for price recovery

Crude oil prices are expected to keep firm in short-and-medium term, according the latest forecast for crude oil supply and demand made by OPEC, IEA and EIA.

Coal prices in ports/thermal coal futures receded recently, but delivered prices of coal to chemical plants remained high or even around 100yuan/mt higher than H1 Mar. The actual coal prices that coal chemical plants could get were nearly the highest within this year. A coal-based MEG plant in Anhui province has lowered operating rate due to high coal prices, and a plant in Henan province has not decided the restart timing.

MEG production margins remain negative

MEG cash flows for different production routes remain low on firm costs.

Loss for ethylene-based MEG: around 1,800yuan/mt

Loss for naphtha to MEG: around $250/mt

Coal-based MEG in loss

Coal (for gasification) prices:

1,100-1200 yuan/mt in Inner Mongolia

1,300yuan/mt in Henan

Based on the average price of 1,000yuan/mt delivered:

the cash cost + freight rate: around 5,200-5,300 yuan/mt

For some plants, the coal prices are above 1,000yuan/mt. So those plants are mostly in losses.

Ethane-ethylene-MEG

Ethane cracking margins remained favorable on rising ethylene price in Northeast Asia. Despite losses in olefin downstream and difficulties in logistics, ethane-based EO/EG plants could still get good margins.

Supply-demand situation

Due to persistent poor economics, MEG output continues decreasing. Decrease in total MEG inventory is estimated at around 150kt in April-May.

Recently, several polyester plants have announced to reduce output in April. Then the supply-demand structure would weaken with the joint output reduction.

Coupled with the spread of Covid-19, restricted transportations, high inventory of polyester products, it would take a long time for the price recovery.