MEG prices increase, eyes on supply-demand changes

China domestic MEG prices has increased to about 4,000yuan/mt on firmer oil/coal prices and improved sentiment in line with the strength in commodity market. In addition, the supply has gradually decreased with the shutdown turnaround of Zhongke early this week. And the operating rate of MEG units in China will decrease given the upcoming turnaround of Yulin Chemical.

There has been a recent concentration of incoming foreign vessels. However, there is a high pollution rate detected in cargoes coming from the United States, and this week, there is a large ship with abnormal indicators waiting for processing. There are still plans for some US cargoes to arrive later, and it is important to monitor the actual discharging progress of these ships. Since June and July, there has been a concentrated arrival of US cargoes, but around 4-5 of these ships have been found to be polluting. This has resulted in a decrease in trading enthusiasm. Additionally, due to the rising price of shale gas and the impact of the Nan Ya 1# and MEGlobal plant closures, it is expected that the supply of US cargoes will moderately decrease after September.

Since the second quarter, there has been a continuous decrease in total MEG inventory in China, with noticeable declines in polyester and MEG plants. Coupled with the recent MEG unit shut down and pollution of imported cargoes, spot availability could decrease. However, the upward momentum is not strong as MEG port inventory remains high.

In the short term, given the moderate contract in MEG supply and high polyester plant operating rate, MEG supply and demand structure will maintain a dynamic balance from July to August without significant buildup of inventories. However, high levels of MEG inventories and ample storage in trade tanks will impact market sentiment and the price increase. Additionally, power restrictions due to hot weather may affect the polyester/end-use market and subsequently affect the demand for MEG.