China's Oct MEG import forecast revised up

Recently, the MEG basis has continued to strengthen, with afternoon spot transactions reaching a premium of around 4-5 yuan/mt over the January contract on August 29. Before early September, the arrival of imported MEG is expected to be limited, leading to a gradual decline in visible inventory, and the short-term price of MEG is anticipated to remain firm. From mid-September onward, the arrival of deep-sea contract cargoes will gradually replenish market supply. Additionally, as the MEG price strengthens, there are plans to delay maintenance or restart operations at facilities like Gulei Petrochemical and ZRCC, along with emerging ideas for reallocating regional supply.

This year, MEG operating rates in South China have remained at relatively high levels. Apart from a previous shutdown at FREP due to equipment failure, other units have been running smoothly. Some suppliers have noted that they are monitoring the offtake of downstream factories in the region, and there is a possibility of redirecting supplies to the East China market in the future.

In addition to potential domestic supply reallocations, overseas supply is gradually increasing. After the restart of PRefChem's 750 kt/year MEG unit in Malaysia, operating rates have quickly risen, significantly boosting output, which will subsequently be shipped to the Chinese market. Moreover, around 20kt of Taiwanese cargo arrived in August, which had previously primarily served domestic demand on the island. Improved MEG prices have attracted some of these supplies to the Chinese mainland market, with further shipments expected in September. Local suppliers have also indicated that they are closely watching market price changes, as existing units have the capacity to resume production.

Similarly, with the improvement in MEG prices, the price gap between the U.S. and China has slightly widened, leading to two shipments of U.S. cargo, totaling over 50kt, being arranged for transport. With other contract cargoes shipping normally, the volume of U.S. MEG arriving in October is expected to increase significantly. Additionally, Nan Ya's 828 kt/year MEG unit in the U.S. is scheduled to restart around mid-September, ensuring that U.S. supplies remain high throughout Q4. Overall, October's MEG import volume could be revised upward to around 550-560 kt, with ongoing attention to changes in overseas facilities.