MEG: Main Port Shipments Near Ten-Year High

Recently, the shipment volumes at a mainstream storage area in Zhangjiagang have remained high, with total shipments reaching 17,410 tons yesterday, including 13,676 tons by truck and 3,734 tons by ship. Reviewing ten years of average daily shipment data at the main port, the highest single-day shipment volume is around 19,000 tons, and current figures are approaching this ten-year high.

Analysis of the Reasons for This Week's High Shipment Volumes:

1. Decline in Social Inventory:

Social inventory has decreased, tightening hidden inventory, while non-main port inventory remains low. Some polyester factories, given the ample supply in non-main port areas, prefer to ship from these regions. However, the current limited inventory and insufficient ship arrivals at the non-main ports cannot meet the daily offtake needs of polyester factories, leading to a shift in shipping volume to Changjiang International. This is why we see a portion of the shipping data reflecting offtake by ships. Moving forward, the decline in this shipping volume will depend on the raw material inventory of polyester factories and the inventory in non-main port areas.

2. Restocking Needs of Polyester Factories:

The raw material inventory of polyester factories had decreased earlier, creating a need for restocking towards the end of the month. Based on our tracking of factory raw material inventory levels, as of mid to late May, these levels have dropped to the lowest in recent years, particularly for some major mainstream factories.

Polyester plants' MEG stocks on a full operating rate basis (in days)

3. Gradual End of MEG Unit Maintenance:

Maintenance in the syngas-based MEG sector is gradually ending, but supply has not effectively recovered. Currently, the operating rate for the syngas-based unit is slightly above 65%. However, due to previous concentrated maintenance or reduced operating rates, most factories have no inventory, leading to an inventory buildup process once the plants resume operations. This makes it difficult to meet the high demand from polyester factories effectively. Starting in June, a major syngas-based MEG supplier will reduce downstream contract supplies by 15-20%.

Operating rate of syngas-based MEG units in China (%)

4. End-of-Month Contract Delivery:

End-of-month contract delivery factors also contribute to the high shipment volumes.

Despite the significant increase in main port shipments, the total arrivals, particularly the ship arrivals at the main port, have been substantial in the past two weeks. Therefore, overall inventory has not significantly decreased. As of yesterday, Changjiang International's inventory was 414,500 tons (including 21,000 tons of offloading). Moving forward, we believe the restocking demand from polyester factories will persist, but attention needs to be paid to the PFY sales ratio in the next two weeks.