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Insight | Time:Jan 4 2018 4:31PM
China's MEG price might break above previous high
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China's MEG market kicked off the first week of 2018 on a flourishing note, with domestic spot price up about 6 percent. Buyers were still active to chase the uptrend when spot price went up above 7,850yuan/mt. Jan market is fundamentally strong. Market participants expected tight spot availability during the days for delivery, as Jan cargoes arrivals mainly in earlier and end month. Inventory level in Changjiang International continued decreasing. Traders were active to cover shorts, which lent strong support to market sentiment.

In polyester chain, cash flows narrowed recently on rising PTA and MEG prices, but still above the break-even lines. Polyester product inventories slipped slightly on improving sales ratio, as end-users purchased moderately.

Inventories of polyester products
Unit: days POY FDY DTY PSF
3-Jan-18 5.4 8.5 17 5.5
15-Dec-17 8 10.8 16.2 7.5

Market confidence was relatively firm on rising crude oil and commodity prices. Traders kept buying at low levels, and some in short of contract supply were active buy. However, polyester plants mainly took contract materials, showing weak intentions to buy spot materials.

However, market players might also see some risks. Currently, spot price was about 200yuan/mt higher than average level. A few polyester plants might emerge to sell spot materials in the market. Meanwhile, buying sentiment might weakened with the completion of short coverings. Market participants should also be aware of narrowing profits of polyester products, and upcoming shutdown or rate cut of end-users during Chinese Lunar New Year holidays.

In short term, MEG market is likely to keep firm on favorable fundamentals and macro environment. Spot price is expected to break above the previous high of around 8,100yuan/mt.
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