China MEG uptrend may continue on strong downstream demand

31 July 2017 07:11 Source:ICIS News

China textile factory 31 July

SINGAPORE (ICIS)--Spot monoethylene glycol (MEG) prices in China’s domestic market have spiked by about 25% over a period of three months, and may continue their uptrend on the back of strong demand from downstream polyethylene terephthalate (PET) sector.

On 28 July, prices stood at an average of Chinese yuan (CNY) 7,320/tonne ($1,086/tonne) from CNY5,860/tonne in early May, according to data compiled by the China editorial team at ICIS.

The PET industry, which is a major downstream market for MEG, has been experiencing stronger-than-expected demand from the textile industry.

PET producers in China have raised the operating rates of their plants to an average of around 82% amid sharp declines in inventory, boosting their demand for MEG.

A major PET buyer was seen procuring huge volumes of MEG from the spot market, while cargoes are concentrated in the hands of a few players, fuelling the spike in prices.

Supply of MEG, on the other hand, was limited between May and July amid turnarounds at facilities – particularly the coal-based units. (Please see table below)

Rising raw material prices also created cost pressures for coal-based producers to increase their MEG offers to the domestic market.

Meanwhile, at the Chinese ports, MEG inventory has fallen below 500,000 tonnes in July from about 600,000 tonnes in early May amid active sales and delays in arrivals of imported cargoes.

Some market players expect demand to weaken after August, while supply will get a boost from import arrivals and fewer turnarounds at domestic plants.

China may also receive fresh supply from India, where a new MEG plant is expected to start up.

Focus article by Cindy Qiu

China MEG 31 July

Producer

Plant Capacity (thousand tonnes/year)

Turnaround dates

Yangzi Petrochemical

280

17 May - 9 July

Shanghai Petrochemical

380

month-long maintenancefrom 10 May

Fushun Petrochemical

40

restarted late July from 2 June shutdown

Hubei Fertilizer

200

two months of maintenance from 26 May

Anhui Huaihua

100

taken off line because of the boiler issue, after restarting in late June from maintenance since early March

Yongjin Puyang

200

early May to late May

Yongjin Anyang

200

maintenance started on 10 May; restarted in mid- to late-May

Yongjin Yongcheng

200

restarted in end-June; shut on 1 June

Xinjiang Tianye

250

month-long maintenance from 6 June

Xinhang Energy

300

month-long maintenance from 11 May

Yangmei Shenzhen

220

11-26 May

Yangmei Shouyang

220

11 May - 2 June

($1 = CNY6.74)

Pictured above: At a textile factory in Shandong province, China. The textile industry is the main downstream of monoethylene glycol (MEG). (Source: Imaginechina/REX/Shutterstock)

By Cindy Qiu