MEG price surged in late session Thursday buoyed by the news that Saudi Arabia's Sharq Eastern Petrochemical Company delayed to restarted its No. 4 700kt/year MEG plant. Domestic traded prices were heard up to about 8,000yuan/mt around 18:00 (UTC+08:00), according to CCFGroup's statistics.
Sharq closed the plant when restarting in early December due to problems in upstream ethylene cracker. However, contract supply for December and January 2017 was not affected.
Saudi Arabia's Yanbu National Petrochemical Company (Yansab) has also closed its 770kt/year MEG plant due to problems recently, a source close to the company said. The restart date has not been settled yet.
On Friday morning, the market continued its strong upward move. Domestic price increased to about 8,100-8,180yuan/mt and CFR China price to $945-950/mt.
Besides the speculations on plant operation, the market could also find strong support from fundamentals.
SUPPLY: LIMITED INCREASE IN SPOT AVAILABILITY, INTENSIVE ARRIVALS IN END JANUARY
MEG cargo arrivals will slightly increase in January 2017, including the delayed cargoes that were scheduled to arrive in December 2016. Sabic and Dow Chemical will keep their supply steadily. Shipment for Dec and Jan from Singapore's Shell Chemicals were delayed given preparation for turnaround in the first quarter of 2017. South Korean sources were partially delayed due to bad weather, while the overall supply was not affected. European cargoes are expected to arrive in end Jan, and the volume is anticipated at about 50kt.
Total cargo arrivals for Jan will increase, but with limited range compared with in the previous years. Considering the holidays for the New Year and Chinese Lunar New Year, days for declaration will be less than usual. The estimated time of deep-sea cargo arrival would be around end Jan.
Domestic output is expected to increase in Jan as some producers may raise EG production ratio with the price rising. The increment is anticipated at about 20kt.
DEMAND: HIGH POLYMERIZATION RATE, STRONG SUPPORT FROM DEMAND
Polyester plant operating rate was around 83% currently, higher than the same period in previous years. Producers did not want to reduce production amid the healthy margins. Loom operating rate decreased gradually, and speculative buying for high-priced filament yarn weakened as well. However, the inventory levels of POY, FDY, and DTY were still low, so some plants may keep running at high rate to raise the inventories.
MEG market would be tight balanced in Jan, based on the estimations of 3.15 million mt polyester production in Jan. Total MEG inventory will remain low in Jan.
MEG market will be fundamentally strong in Jan on healthy supply and demand condition. Traders may probably buy for delivery in the first half of Jan, prior to the Chinese Lunar New Year in the end Jan. Spot availability will remain tight in the first half of Jan and the prices will be supported. However, some market players may sell for profit taking, which could weigh down prices.