28 December 2012 08:11 [Source: ICIS news]
SINGAPORE (ICIS)--Asia’s monoethylene glycol (MEG) prices surged to a 14-month high because of strong buying activity from both traders and end-users on speculation of plant shutdowns and restocking demand from downstream polyester users, market sources said on Friday.
The spot MEG prices were discussed at $1,195-1,200/tonne (€896-900/tonne) CFR (cost & freight) China Main Port (CMP) on 28 December, up by $57-60/tonne, or 5% week on week, according to ICIS.
The strong uptrend was driven by market talk that some Middle East MEG plant was shut down unexpectedly, but details were elusive, sources said.
However, a lot of speculative traders chose to believe it and were actively seeking spot cargoes throughout the week.
“Market is strong anyway whatever from downstream demand, economic outlook and upstream energy prices,” a major regional trader said.
Asia’s MEG prices have since mid-November been on an uptrend, and have increased by 15% during the six-week period on the back of an upbeat China economy outlook, according to ICIS.
“We have been waiting for prices to come down slightly so that we can buy in more cargoes to build up inventories for the new year, but the uptrend has never stopped,” a second-tier trader said.
A healthy polyester demand in the last week of 2012 lent additional support to buying interest, sources said.
The sale-to-output ratio of polyester yarn producers in China jumped to 150-200% on 24 December before it fell slightly to 80-100% for the remainder of the week, according to Chemease, an ICIS service in China.
“Quite a few polyester makers are requesting MEG spot cargoes today to meet the shortfall of contract supply,” a Zhejiang-based trader said.
End-users are sitting on a low level of MEG inventory of around one week’s worth against a safe level of around two weeks’ worth, according to a major MEG producer in China.
“Our MEG contract supply volume has been reduced by suppliers for 2013,” a major Jiangsu-based polyester maker said.
China has started up 3.1m tonne/year new polyester capacity in the second half of 2012 and is expected to put on stream another 2.6m tonne/year new polyester capacity in the first quarter of 2013, according to ICIS.
This will increase demand for feedstock MEG by 1.9m tonne/year, while MEG capacity expansion is likely to be around 500,000 tonne/year in early 2013, according to ICIS.
Domestic MEG prices were discussed at yuan (CNY) 8,850-8,900/tonne ($1,418-1,426/tonne) EXWH (ex-warehouse), up by CNY350-370/tonne from the previous week, according to ICIS.
($1 = €0.75 / $1 = CNY6.24)
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