MEG import forecast adjusted down amid US delays and Iran constraints
US supply
By mid-October, the MEG arbitrage spread between the US and China widened to around $120/mt, encouraging suppliers to expedite shipments, resulting in several tenders closing at once. Initial calculations based on previous shipping schedules suggested a concentrated arrival of about 110,000 to 120,000 tons of MEG from the US in December. However, delays in shipping have adjusted these expectations. A significant shipment initially planned for mid-November has been delayed until this week, with an expected arrival in mid-January. Consequently, the projected December arrivals have been revised down to approximately 70,000 to 80,000 tons, with similar volumes anticipated for January. Factors to monitor include local plant maintenance schedules and potential tariff adjustments.
Iranian MEG
No reports of plant shutdowns have been heard, but the pace of recent tenders has been slow. Since the restart of the 450kt/year Pars Glycol plant in late October, only contractual supplies have been maintained, with no additional tenders reported. Tenders from other plants have been progressing slowly, with the last tender closing in mid-November, and loading scheduled for early December. No further tenders are currently under negotiation.
Summary
Both US and Iranian MEG supplies are expected to be lower than initially forecasted. Additionally, supplies from Canada and Saudi Arabia are also low, suggesting that long-haul MEG imports will not concentrate in December and January. Imports are now projected to average around 560,000 to 570,000 tons.
Impact on Domestic Supply and Demand
With the revision of MEG import expectations and some domestic capacity scheduled for maintenance, there is a moderate alleviation of supply pressure on the 2501 contract. Polyester plants are currently operating at around 92% capacity, with demand remaining stable. For December and January, polyester polymerization rate is expected to run at 89.5% and 85.5% respectively, leading to an inventory buildup of MEG at around 250,000 tons, which is slightly higher but narrower than previously anticipated. With imports not concentrating at ports, the increase in social inventory is expected to be more gradual, primarily affecting the less visible sectors of the supply chain.
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