China MEG demand to pick up in Sept; '19 start-ups behind schedule

Author: Cindy Qiu

2019/08/30

SINGAPORE (ICIS)--China’s demand for monoethylene glycol (MEG) is expected to pick up in the next two months, with little near-term boost on supply as most domestic plants are running at reduced capacity while 2019 start-ups have lagged behind schedule.

Workers at a garment factory in Huaibei City, Anhui province, east China. (Source: Imagine China/Shutterstock)

The escalating China-US trade war and the slumping Chinese yuan against the US dollar remain as major concerns, particularly for exports of textiles – the key downstream industry of MEG.

September and October are typically the peak consumption months for downstream polyester sector, which is also due to welcome additional capacities in the months ahead.

Domestic MEG plants, on the other hand, have been running at 62-65% of capacity since May amid shutdowns and production cuts, down from 77% in the first quarter, according to ICIS data.

Spot MEG prices in China had slumped from March to May, followed by periods of largely volatile trades in the succeeding months.

On 29 August, prices in east China were at yuan (CNY) 4,590-4,660/tonne ex-tank, up by 3.7% from the start of the month, according to ICIS data.

ICIS Editorial Chart goes here

Production cuts across gas-based, oil-based and coal-based facilities had helped prop up prices in August, as the market was previously saddled by high inventory due to strong imports amid weak demand.

MEG producers struggling with squeezed margins have resorted to reducing output to stem losses.

Poor market conditions have caused some delays in start-ups of new facilities this year, with only Xinjiang Tianye’s 100,000 tonne/year unit managing to begin production in early August.

A total of 3m tonne/year of MEG capacity was supposed to come on stream in 2019, up from the previous year’s actual capacity addition of 2.77m tonnes/year, according to ICIS data.

Two major facilities with a combined capacity of 1.65m tonnes/year are due to start up in the fourth quarter.

China’s new MEG units in H2 2019

Location Producer Capacity under construction (in '000 tonnes/year) Technology Start-up schedule
Xinjiang Xinjiang Tianye 100 Coal-based Early August
Inner Mongolia Yankuang Group 400 Coal-based Trial runs set in October
Henan Yongcheng Yongjin 200 Coal-based Q4
Zhejiang Zhejiang Petrochemical 750 Ethylene-based Q4
Dalian Hengli Petrochemical 900 Ethylene-based Q4

Any market impact from new supply this year, however, is unlikely to be felt as it usually takes time for start-ups to achieve stable production.

In Asia, supply is expected to be curtailed by scheduled maintenance at regional facilities.

Maintenance of MEG units in Asia

Producer Location Capacity (in '000 tonnes/year) Shutdown date/duration
Lotte South Korea 300 About a month from mid-October
Lotte South Korea 400 About a month from mid-October
Nanya Taiwan 360 About one month from 15 August
Nanya Taiwan 360 About 20 days from 19 September
Nanya Taiwan 720 About one month from November
PETRONAS Malaysia 400 Nearly two months from 18 August
Shell Singapore 900 50 days from October

Consequently, China’s MEG imports will likely fall from a monthly average of 900,000 tonnes.

Imports account for around 60% of the country’s total MEG consumption per month.

Focus article by Cindy Qiu

($1 = CNY7.15)

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