SINGAPORE (ICIS)--Asia import monoethylene glycol (MEG) prices weakened this week amid falling polyester sales, and the market will be likely under pressure as downstream demand may slow gradually amid a second wave of coronavirus infections in overseas markets.
Spot discussions were heard at $470-475/tonne CFR China Main Ports (CMP) on 29 October and most buyers just watched the market due to price declines starting from late last week.
Spot MEG prices rebounded from 9 October amid the post-holiday restocking, according to ICIS.
The polyester sales-to-output ratio fell to 30-50% this week from 75-100% seen last week as downstream converters took a break amid higher inventories after replenishing actively in earlier weeks.
“Downstream textile converters are sitting at higher stocks, so they need some time to absorb,” a major downstream polyester producer said.
Buying interest for import MEG dwindled as most polyester producers expected the demand to slow down from November onwards as the year-end period is usually the lull season for textile industry, especially this year.
The strong performance of textile industry after China’s National Holiday was mainly because of some “urgent orders” from other Asian countries as the textile factories in those countries were shut down due to coronavirus.
“Amid the worsening pandemic in India and Sri Lanka, local textile producers are unable to deliver export orders as usual, and as a result orders for products such as towel and sheets are being diverted to China,” according to Rachel Qian, ICIS lead analyst.
Once these orders are completed, the production in textile sector will drop against the backdrop that some European countries declared lockdowns to combat second wave of coronavirus infections, sources said.
“Given the serious situation in Europe, the textile export business may be disrupted again,” a separate polyester producer said.
“2020 is a tough year. I think the last two months of the year will be even more difficult than last year as the exports orders from Europe may face a sharp decline,” the polyester producer said.
MEG market is expected to be under pressure in coming weeks given the slowing deamnd, but the limited supply will be likely to lend some support to the market.
In the fourth quarter of the year, there are some turnarounds in Asia, Middle East and the US, sources said.
“Overall, most MEG producers are running units at reduced rates due to poor margins, which may provide support to MEG prices,” a regional trader said.
Spot MEG weekly prices closed at $487-492/tonne CFR CMP in the week ended 23 October, the highest level since early March, according to ICIS.