FocusAsia MEG prices to rise ahead of peak textile season

21 July 2011 06:08  [Source: ICIS news]

By Judith Wang

The peak textile season will arrive in September. MEG is used in the manufacture of polyester textiles.SINGAPORE (ICIS)--Asia monoethylene glycol (MEG) prices are expected to firm in the next two months because of the start-up of new downstream polyester capacities, stable supply and strong demand from the textile sector, industry sources said on Thursday.

Asia MEG prices were at $1,200-1,205/tonne (€840-844/tonne) CFR (cost & freight) CMP (China Main Port) at the close of trading on 20 July, up by $40/tonne from 12 July levels, according to ICIS data.

“Many speculative traders are in the market to seek cargoes as they believe MEG prices will not have a big risk of falling and even have the potential to rise in the second half of this year. This is because there will be no additional MEG capacity expansion in 2011 and 2012, but some new downstream polyester plants will come on stream in the following months,” a trader said.

Around 1.3m-1.5m tonnes of polyester capacities are expected to start up in the third quarter, market sources said.

As a result of the positive market outlook, many traders have been actively purchasing August and September cargoes in anticipation of a price increase, sources said.

“I think MEG prices will firm at around $1,200/tonne from late July to August. And prices will likely rise from September amid the arrival of the peak textile season,” the trader said.

However, end-users did not snap up cargoes actively because of the rise in prices and abundant inventories. End-users have been building up cargoes from MEG producers in Middle East in the past two months after Taiwan’s Nan Ya Plastics shut down its four MEG units.

“We have sufficient stocks, which will be consumed for around three weeks. We are not in a rush to procure more cargoes,” a polyester producer in China’s eastern Zhejiang province said.

The sales-to-output ratio at most Chinese polyester yarn plants for most days in July was at above 100%, indicating stable demand from the downstream textile sector, although July is an off season for the textile sector in China.

“The demand for polyester products is good and our sales are also better than expected in a lull season. I hope the good situation can extend to next month,” another polyester producer said.

($1 = €0.70)

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By: Judith Wang
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