MEG localization-more attentions on inventory structure change

MEG prices remained low in the second quarter of 2022, as market sentiment was pressured by persistent low offtake and high port inventory. The offtake in Zhangjiagang remained low on weakening demand with polyester polymerization lower than 80%.  

LOW OFFTAKE VOLUME: 

Due to the restricted transportation affected by the Covid-19 lockdowns, the throughput in port areas slowed down. Meanwhile, rising China domestic cargo also replaced some imported cargoes. In terms of coal-based MEG, monthly output of coal-based MEG was around 390-400kt in the first five months of 2020, much higher than the monthly average of 280kt in 2021. The substitution to port offtake volume was approximately around 4,000 tons per day.  

Besides the substitution to imported cargoes, inventory in MEG producers has also increased. Spot cargo supply and trading volume might be increased in accordance with the selling activities of MEG producers.  

In April-May, MEG inventory in polyester plants decreased rapidly. However, with the easing logistic restrictions, inventory in MEG producers have been gradually moved to polyester plants. But offtake in port areas remained slow.  

OUTLOOK: 

MEG port inventory will keep high due to limited remaining tank space and US cargoes to arrive in June. The decrease in port inventory would be in July-August.