China MEG faces downward pressure as oversupply looms

13 September 2017 05:51 Source:ICIS News

China textile factory 13 September

SINGAPORE (ICIS)--Domestic monoethylene glycol (MEG) prices in China are facing downward pressure after surging by more than 30% from May, as supply may outpace demand in the coming months amid strong production.

On 12 September, prices stood at Chinese yuan (CNY) 7,550-7,610/tonne ex-tank, down CNY10-60/tonne from the previous day, according to data compiled by the China editorial team at ICIS.

In the week ended 8 September, domestic MEG prices were assessed at CNY7,775/tonne ex-tank, according to ICIS data.

Strong MEG prices have encouraged Chinese producers to run their plants at high rates due to good production margins, but this could lead to a build-up in supply for the rest of the year.

Supply in the import market may also turn ample as MEG plants in the Middle East had completed their turnarounds. China sources the bulk of its MEG imports from the Middle East.

Demand, on the other hand, may be hit as downstream polyester producers are grappling with higher production cost stemming from spikes in MEG prices.

In May through to July, MEG prices in China surged on the back of tightened supply amid turnarounds at domestic plants and better-than-expected demand, before slightly pulling back.

Prices resumed their strong uptrend from late August due to supply concerns massive shutdowns of US refinery and petrochemical capacities in the aftermath of Hurricane Harvey, which hit the US Gulf Coast in late August.

US MEG plants – including LyondellBasell’s 265,000 tonne/year plant; Huntsman’s 450,000 tonne/year plant; and Indorama’s 380,000 tonne/year unit – have halted production.

China, which is a major importer of MEG in Asia, can expect smaller import volumes from the US in September and October, a market player said.

But the US shutdowns are not expected to translate to a significant reduction in MEG import supply for China, industry sources said.

China's monthly MEG imports are pegged at around 700,000 tonnes.

In January to July 2017, MEG imports from the US totaled 121,100 tonnes with a share of 2.5% to China's overall imports of the material, according to China Customs data.

Focus article by Cindy Qiu

China MEG ex-tank prices 13 September
Source: China editorial team at ICIS

($1 = CNY6.53)

Pictured above: Workers at a textile factory in Qingdao, China. The textile industry is the main downstream of monoethylene glycol (MEG). (Source: KeystoneUSA-ZUMA/REX/Shutterstock)

By Cindy Qiu