MEG: Q3 Import Expectations Revised Down

Since July, MEG inventory in major East China ports has continuously declined. Port inventory decreased by about 100,000 tons in the first half of the month, primarily due to a scarcity of foreign vessel arrivals. From mid-July, arrivals have moderately increased, with the increment mostly reflected in secondary port areas. For instance, the Jiangyin area's arrival volume this month is expected to reach 90,000 tons. However, arrivals in the Zhangjiagang area remain low, and the contraction of transferable spot goods has led to a decrease in shipments.

Based on actual unloading conditions, the expected MEG import volume for July has been revised down to approximately 520,000-530,000 tons. Looking ahead, changes in deep-sea cargo supply will significantly impact MEG import volumes.

Supply Sources Analysis

Near-Sea Sources: With recent increases in absolute prices, supply from South Korea and Taiwan has slightly increased. In early July, tenders for Lotte and KPIC sources, totaling about 15,000 tons, were planned for supply to the Chinese market in August. We will continue to monitor subsequent new tender progress. Additionally, Taiwanese cargo may moderately return in July-August, albeit in small volumes.

Deep-Sea Sources:

Canada and Kuwait: Currently showing stable performance.

Iran: Attention is needed regarding the restart progress of BCCO's 450,000 tons/year facility. Overall supply remains saturated until this facility returns.

Saudi Arabia: Monthly supply to the Chinese market from January to May averaged around 240,000-250,000 tons. Due to local gas shortages, JUPC2#'s 640,000 tons/year facility has been shut down since mid-July, with an undetermined restart date. Other facilities are operating at reduced capacity. Some major suppliers have indicated tight supply for August and September, increasing market demand for external procurement. Third-quarter supply from Saudi Arabia is expected to remain low, similar to the first half of the year's average. For the fourth quarter, attention will focus on potential alleviation of the local gas supply shortage.

United States: The US-China arbitrage window has gradually opened since late May. With the resolution of Panama Canal congestion, US-China shipping costs have decreased significantly this year. The first-half price center was around $80-100/ton, and currently, shipping costs can be covered under the arbitrage window. Facilities mostly maintain full-load operations due to low local raw material costs, ensuring sufficient overall supply output. July's arrival volume of US cargo is approximately 100,000 tons, with smooth vessel unloading. Some US cargo is still under negotiation, and the next increase in US cargo is expected in the second half of September, while August arrivals show neutral performance.

Outlook

The average MEG import volume for the third quarter is expected to be revised down to around 550,000-560,000 tons, with ongoing attention to changes in deep-sea cargo supply. Regarding domestic supply, focus should remain on the restart and capacity increase progress of large facilities such as Satellite Petrochemical and Zhejiang Petroleum & Chemical.