SINGAPORE (ICIS)--Asia’s monoethylene glycol (MEG) prices surged to their highest in nearly six months on tight supply amid cuts in regional output and hurricane-related plant shutdowns in the US.
Spot discussions on Wednesday morning increased to $480-490/tonne CFR (cost & freight) CMP (China Main Ports), up from the closing prices of $475-480/tonne CFR CMP on 1 September.
Supply in Asia has tightened as major MEG producers were running their units at reduced rates to cope with eroded margins amid strong prices of feedstock naphtha.
Spot naphtha prices have risen above $400/tonne CFR Japan since late August, resulting in either meager or no margins for MEG producers.
A major South Korean producer has postponed the restart of its MEG unit from maintenance given poor margins.
“Feedstock prices are still high, so we will maintain [operating rates] at 70-75% in the near term,” a Taiwanese producer said.
Furthermore, the unplanned plant shutdowns in the US have exacerbated global MEG supply tightness.
More than a third of US MEG production capacity have declared a force majeure in the wake of Hurricane Laura.
The US is a major exporter of MEG, but currently could not supply enough cargoes to Europe, which could start seeking cargoes from Asia amid an open arbitrage window, market sources said.
“This will tighten the Asia supply again,” the trader said.
“US exported many cargoes this year to China, but the exports will drop in the second half of the year given the upcoming heavy turnarounds, on top of the recent plant shutdowns hit by the hurricane,” a regional trader said.
MEG demand in Asia is due for a seasonal pick up in September and October.
“Downstream polyester plants are running at higher rates in anticipation of rising restocking activities this month and next month,” a separate trader said.
MEG supply is expected to get a boost in the near term, with two new plants with a total capacity of 900,000 tonnes/year due to start up in late September or October.
“We are still cautious because new capacities are coming up,” a downstream polyester producer said.
Focus article by Judith Wang
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