China MEG halts uptrend on lacklustre demand, influx of imports

Focus article by Eric Su

SINGAPORE (ICIS)–Import prices of monoethylene glycol (MEG) in China have snapped four consecutive weeks of gains given no significant improvement in demand from downstream sectors, market sources said on Monday.

An influx of imported cargoes into China ports in March amid a slower-than-expected recovery of production at downstream polyester textile sectors weighed on the market, they said.

On 13 March, MEG spot prices were assessed at $822-829/tonne CFR (cost and freight) China Main Port (CMP), down $12-13/tonne from the previous week, according to ICIS data.

Prices have declined after gaining an average of $96.50/tonne over a four-week period, aided by stabilising energy values and expectations of an uptick in demand.

But market direction turned uncertain for the rest of March and into April, market sources said.

A number of buyers in the downstream sector have sufficiently covered their requirements for March, and were not in a rush to procure cargoes, a producer said.

Polyester producers’ stocks on hand were also building up, given their low sales-to-output ratio, market sources said.

The average sales-to-output ratio of Chinese polyester filament yarn (PFY) producers stood at 40-80% as of 13 March, indicating that PYF inventory is rising, market sources said.

At China’s main ports, however, MEG inventory levels remain low, so most market participants do not expect any significant price fall in the near term.

On 13 March, MEG inventory at China’s coastal area stood at 588,000 tonnes, down by 21,000 tonnes from the previous week, industry sources said.

Inventory levels at China’s main ports remains low but the slow recovery of demand have dampened buying interest, market sources said.

Buyers in the textile market have procured sufficient cargoes to cover until end-of-March, so demand is likely to remain slow at least until April, a polyester producer said.

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