Asia MEG market to see pressure from slowing demand despite cost support

Author: Judith Wang

2020/07/17

SINGAPORE (ICIS)--Asia's import monoethylene glycol (MEG) market is expected to be weighed down by slowing polyester demand, although feedstock cost remains high.

Spot MEG prices have been hovering at the low $400s/tonne CFR China since May, according to ICIS data.

July and August are usually the lull months for the polyester industry, and Chinese polyester producers are cutting back on operations amid the slowing demand and eroded margins.

Export demand is expected to stay weak as export business will slow down during the summer holiday in Europe.

Polyester operation cuts is expected to remain in place during the summer season as most polyester producers are facing not only inventory pressure, but also cash flow issues.

“Now we can only pin our last hopes on September and October as these two months are the peak season for the textile industry,” a Chinese polyester producer said.

The slowing demand also resulted in rising port inventories. China’s port inventories have increased to close to 1.5m tonnes, the highest level since 2014.

“The port inventories will remain at high levels as the demand is still too weak,” a regional trader said.

Regional producers reduced operations to cope with eroded margins as feedstock naphtha prices remained strong at close to $400/tonne CFR Japan, but supply in the market remained ample.

The spot MEG market fell into a standstill as sellers held firm to their offers amid supply cuts, but buyers and end-users were not keen to replenish cargoes due to weak downstream performance.

Spot MEG prices closed at $420-422/tonne CFR China on 16 July, according to ICIS data.

Focus article by Judith Wang