East China MEG prices at 14-month low on weak demand, high stocks

09 March 2012 11:23  [Source: ICIS news]

SINGAPORE (ICIS)--Monoethylene glycol (MEG) prices in east China have fallen to a 14-month low, because of weak demand from the downstream polyester sector and high port inventory levels, industry sources said on Friday.

MEG spot prices declined to yuan (CNY) 7,900-8,000/tonne ($1,252-$1,268/tonne) ex-tank east China on 8 March, compared with CNY8,550-8,600/tonne on 4 January 2011, according to Chemease, an ICIS service in China.

China’s polyester producers had an average sales-to-output ratio of 50-70% since early February, because downstream textile manufacturers received fewer domestic and export orders, a trader said.

Most polyester producers’ inventories are high and some polyester filament yarn producers have enough inventories for 30 days, said a producer.

Most polyester producers also have high levels of MEG, because they were expecting MEG prices to increase after the Lunar New Year holiday in late January, and thus they purchased abundant amounts of the feedstock, a trader said.

MEG prices were expected to rise after the Lunar New Year holiday, because demand had increased during this period for the past two years, while supply remained stable.

As a result, some downstream polyester producers were forced to sell MEG for liquidity reasons, the trader said.

In addition, China’s port inventories of MEG rose to around 750,000-800,000 tonnes after the Lunar New Year holiday in late January from 650,000-700,000 tonnes before the holiday, according to Chemease.

Port inventory levels have almost reached maximum port capacity levels and are expected to stay high, as March contract imports are arriving, a market player said.

MEG prices may continue dropping, as downstream demand is still weak and the MEG inventories of polyester producers remain high, said a purchaser at a polyester factory.

A MEG trader said it will not sell its cargoes at lower prices, as it paid high prices for them.

“We hope polyester production and sales will recover from late March [onwards] with the upcoming peak season for textile manufacturing,” the trader added.

The peak textile manufacturing season is traditionally in March each year.

($1 = CNY6.32)

By: Jenny Jin

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