FocusAsia MEG hits 44-month high, may extend gains on tight supply

07 September 2011 07:07  [Source: ICIS news]

China textile factory in Shandong province. MEG is used in the manufacture of textiles.By Judith Wang

SINGAPORE (ICIS)--Spot monoethylene glycol (MEG) prices in Asia may strengthen further in the near term, after hitting a 44-month high last week, as supply of the material is expected to tighten, market sources said on Wednesday.

In the week ending 2 September, MEG spot prices were assessed at $1,275-1,285/tonne (€918-925/tonne) CFR (cost and freight) CMP (China Main Port), close to levels last seen on 11 January 2008, according to ICIS data.

“MEG prices are rising to peak point since the global economic crisis. Prices will rise above $1,300/tonne very soon because of speculation on tight supply,” a regional trader said.

Scheduled turnarounds at regional plants will shave MEG supply to the Asian market.

Taiwans major MEG producer Nan Ya Plastics will be cutting its contract supply to customers by 25% this month, as its four plants with a combined capacity of 1.8m tonnes/year are due for turnarounds, by rotation. Two of its MEG units will be shut this week, said a company source.

Meanwhile, China’s Shanghai Petrochemical plans to shut down its 380,000 tonne/year MEG unit in mid-September for a month of scheduled turnaround.

In Saudi Arabia, Jubail United Petrochemical Co (JUPC), a subsidiary of SABIC, will conduct a 35-day maintenance at its 640,000 tonne/year No 2 MEG plant in Al-Jubail, also from the middle of the month.

“The MEG supply in September will be tight due to supply loss, so prices will continue to gain momentum,” said a second trader.

Sellers are raising their offers and are not in a rush to offload cargoes, while end-users are anxiously snapping up the available supply.

MEG supply is tightening at a time when demand coming from downstream textile industry is traditionally strong. Polyester producers are also replenishing their stocks ahead of the week-long holiday in China.

China celebrates National Day from 1 to 7 October.

“The polyester plants will run at high operating rates in these two months, so they need more MEG and there is no reason to see prices fall,” an end-user said.

Asia MEG price graph

($1 = €0.72)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Judith Wang
+65 6780 4359

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