MEG market to see potential increase in inventory

As of November 14, MEG supply has significantly increased, particularly from syngas-based production. The operating rate of MEG units in Chinese mainland rose to 71.03% (+3.63% WoW), with syngas-based MEG at 70.47% (+9.92% WoW). This uptick was mainly driven by output gains from Tianye, Huayi, and Shouyang units. Huayi resumed operations at 70-80% capacity and is expected to stabilize at this level; Tianye has reached full capacity, maintaining it moving forward; Shouyang restarted, with daily output ramping up rapidly to sustain high operating rates. Attention in late November and December will be on Yuneng Chemical and Xinjiang Zhongkun's maintenance schedules. If plans proceed, syngas-based MEG operating rates could climb to ~75% by mid-December, a multi-year high.

Ethylene-based production also remains robust, with some suppliers shifting production from EO to MEG, adding incremental output of 200-500 mt/day per facility. As the Chinese New Year approaches, this trend may intensify. Additionally, ZRCC plans to restart its 800kt/year unit in Ningbo in late December, contributing further supply.

Since November, end-user demand has softened, evidenced by weaker sales from weaving and texturing enterprises and rising inventory levels. The weaving order index indicates a sharp decline in demand compared to mid-October. In the polyester sector, POY inventory has risen to an average of 21 days, with downstream buyers reluctant to restock beyond immediate needs, preferring a cautious stance. This trend suggests persistent inventory pressure through late November and December. Current filament yarn stocks are already a week higher than the same period last year, signaling significant inventory and production cut risks ahead.

In December, MEG is expected to face a supply-demand imbalance, with rising inventories posing a key pressure point. Visible stocks could reach ~800kt by late December. Moreover, high MEG operating rates may lead more cargoes available in the market, further exacerbating market pressure.