FocusOutlook on Asian MEG market uncertain after China holiday

04 October 2011 04:34  [Source: ICIS news]

By Judith Wang

Prices of MEG, a feedstock for textiles, face an uncertain futureSINGAPORE (ICIS)--The Asian monoethylene glycol (MEG) market will face uncertainty when China’s week-long holiday ends, as supply will be limited because of plant turnarounds, while demand will be weak as a result of the grim global economic climate, market sources said on Tuesday.

Prices of MEG closed at $1,230-1,235/tonne (€935-939/tonne) CFR (cost & freight) CMP (China Main Port) on 30 September, down by $90-100/tonne from 9 September when prices hit a 44-month high, according to ICIS data.

Trading has slowed this week, sources said, as the China market is closed for the National Day holiday from 1-7 October.

Some market players said that prices may rebound after the holiday as end-users replenish cargoes.

“After the holiday, the active procurement from end-users may bolster the prices, like the market situation that happened last year,” a trader said.

Ongoing and upcoming shutdowns of MEG plants in the Middle East, South Korea and Taiwan are also expected to support prices.

Taiwan’s Nan Ya Plastics shut its No 1 and No 2 Mailiao units, each with a capacity of 360,000 tonnes/year, on 8 September for about a month-long turnaround.

SABIC will shut its three MEG plants for maintenance from the middle of September.

South Korea’s Honam Petrochemical plans to shut down its two Daesan MEG units, with a total capacity of 650,000 tonnes/year, in early October for about 45 days of maintenance.

Meanwhile, several market players said the impact of Shell’s force majeure on MEG in Singapore will be limited because of weak demand as a result of the European debt crisis and the holiday in China.

“MEG margins are good enough… they [Shell] can buy C2 [ethylene] which balance is still long. And the accident has not affected the MEG units, so they can lift force majeure at any time,” a trader in South Korea said.

Whether MEG prices will rise or not after the holiday still depends on demand amid the weak global economic situation, an MEG producer said.

Concerns of another global recession, falling crude futures, as well as the volatile global stock market will add uncertainty to the market, sources said.

“Now the macro-economy is a key factor affecting the MEG market. If the global economy is still soft and crude continues to slip, then MEG prices may extend falls after the holiday,” another trader said.

“It is really hard to predict the price trend in October now, as [there are] too many uncertain factors,” the trader added.

Prices of co-feedstock terephthalic acid (PTA) also plunged to $1,165-1,220/tonne CFR CMP for the week ended on 30 September, down from $1,320-1,360/tonne CFR CMP on 19 September, according to ICIS data.

($1 = €0.76)

For more on MEG, visit ICIS chemical intelligence
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By: Judith Wang
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