East China MEG falls 11% in two weeks on crude falls, poor demand

15 June 2012 08:11  [Source: ICIS news]

By Jenny Jin

MEG goes into textile productionSINGAPORE (ICIS)--Monoethylene glycol (MEG) prices in east China have declined by 11% over the past two weeks, tracking falls in crude oil prices and amid weak demand from downstream polyester sector, industry sources said on Friday.

MEG spot prices declined to yuan (CNY) 6,330-6,380/tonne ($994-$1,001/tonne) ex-tank east China on 14 June, compared with CNY7,150-7,200/tonne on 1 June, according to Chemease, an ICIS service in China.

Panic-selling in the MEG market ensued following sharp falls in crude prices. Some traders have been dumping cargoes to prevent further losses, while others are staying out of the market.

MEG buyers, on the other hand, are not too keen to procure cargoes. On Friday, crude prices were trading at above $84/bbl, down by about $2/bbl from the start June.

“Though prices decreased to the low level from 2011, I am still hesitating to purchase lots of cargoes considering the uncertain economic environment,” a trader said.

Downstream polyester producers in China are being forced to cut product prices to boost sales, but their overall sales-to-output ratio this week has worsened to 50-70%, from 70-80% a month earlier, as downstream textile manufacturers are getting limited orders within China and from abroad.

Operating rates at China’s polyester facilities were further adjusted down to 78% this week from 81% two weeks earlier, thereby slowing down the consumption of feedstock MEG.

MEG inventories at Chinese ports have declined to around 750,000 tonnes  this week from 800,000-850,000 a month earlier, with a number of Middle Eastern and Taiwanese producers that export MEG to China are conducting maintenance at their plants between May and June.

Chinese petrochemical major Sinopec, meanwhile, is still considering running its MEG plants at full capacity as production margins have improved with the softening prices of feedstock ethylene, market sources said.

($1 = CNY6.37)

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


By: Jenny Jin



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