MEG: Bearish factors slowly accumulating, market sentiment under pressure

As of Monday, MEG inventory at East China main ports rose to approximately 637kt, marking a significant increase from last Monday. This was primarily due to the smooth discharging of MEG cargoes, with a focus on deep-sea cargo arriving at ports. Additionally, domestic shipping deliveries were also efficient, and with MEG's monthly settlement prices remaining high, suppliers were actively selling.

Looking ahead this week, MEG cargo arrivals at main and secondary ports are forecasted to be around 140kt, a neutral figure overall, but the shipment schedule is relatively front-loaded, suggesting that visible inventories will remain high through next Monday. There are also some small volumes of domestic cargoes arriving at ports via trucks, but the volumes are relatively minor. From an inventory perspective, MEG is expected to enter a slow accumulation phase starting in late October.

Since October, MEG production in China has increased significantly, with syngas-based MEG units expected to raise their operating rates to over 70% by early next month. As for conventional units, despite scheduled maintenance plans for Far Eastern Union Petrochemical, Sinopec-SK Wuhan, and Fujian Refining & Petrochemical in October, some plants have ramped up their production in response to previous price increases. Currently, non-syngas-based MEG units are maintaining an operating rate around 69%-70%. Regarding syngas-based units, this week Jianyuan is gradually ramping up its rate, with additional restart and ramp-up plans for Shanxi Shouyang, Yuneng Chemical, Shanxi Meijin, and Xinjiang Tianye's Phase III unit by the end of the month. Additionally, Guangxi Huayi is scheduled to restart in November after being shut down since April 2023. Among the new units, products from CNCEC's unit began to be delivered in mid-October, and further attention will be needed on its operation. Overall, domestic MEG supply is expected to become increasingly ample starting in November.

Currently, polyester operating rate remains above 92%, providing strong support for MEG's rigid demand. However, since the Golden Week holiday, polyester sales have remained subdued, with weak follow-up from end-use markets. Inventory levels of polyester products continue to build up, with POY stock now rising to over 18 days. If downstream demand fails to pick up soon, negative feedback along the supply chain could gradually develop.

Overall, the MEG market fundamentals are showing signs of weakening, with bearish factors slowly accumulating and market sentiment under pressure. However, MEG social inventories and the inventory-to-sales ratio are still relatively low, which may lead to some price fluctuations at lower levels in the short term. The market is expected to experience weak and volatile conditions, with attention focusing on costs and changes in production units.