MEG rebounds on further output contraction

MEG spot and futures prices increased Thursday on news of further output contraction after hovering low for a while.

Besides planned maintenance, some producers were inactive to keep the units running due to poor economics. Operating rate of MEG units in China is expected to fall to a quite low level in mid-August. Coal-based MEG plant operating rate is expected to fell to around 35% or even lower.

China domestic MEG supply will further decrease in July-August. Based on the estimation of 81%, 85% and 87% for polyester polymerization rate in July, August and September, total MEG inventory is expected to decrease by around 200kt.

However, MEG inventory remains high and the supply-demand structure remains weak. Meanwhile, a lot of MEG cargoes are expected to arrive in end-July. The upward momentum may weaken with the improvement of production margins.