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Insight | Time:Apr 10 2018 9:58AM
MEG to maintain strong momentum on unit turnarounds and port congestion
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MEG port inventory decreased apparently in early April, as warehousing of MEG slowed down due to waterway closure in Yangtze River Estuary. By April 8, MEG inventory in East China main ports was around 755kt, down 72 kt from March 29, ending the continuous rise since February. The warehousing may keep slow as lots of cargoes will arrive and it takes time to ease the congestion.

Operating rate of China domestic MEG units fell rapidly to around 70% with the turnarounds of Sinopec Sabic Tianjin Petrochemical and PetroChina Sichuan Petrochemical. ZRCC, BASF-YPC and Fund Energy have turnaround plans in end April. By then, the rate is expected to fell below 60%. In May and June, Far Eastern Union, Sanjiang Chemical and North Chemical have plans for annual turnarounds. The operating rate will keep low in the second quarter. While in demand side, operating rate of polyester plants remained around 93.5%. In mid-April, Sanfangxiang, Jinlun and Yida (former Xiangsheng) are expected to restart their units. Total capacity of the three is 1 million mt/year. MEG demand from polyester plants will keep firm.

PTA, the other major feedstock of polyester, posted weak performance recently. MEG-PTA spread had reached around 2,300yuan/mt. While in downstream, operating rate of end-users was high and orders were good. Polyester sales were favorable with decreases in inventories. The inventories decreased by about 5-6 days from the high level after Chinese New Year. The weakness in PTA also left upward room for MEG, under the situation of high operating rate of polyester and favorable profits.

Market confidence improved on favorable fundamentals in Q2 with inventory decreases in MEG and polyester. In addition, spot availability was concentrated as several major traders and polyester plants bought aggressively. This was somewhat similar with market activities in October 2017. In short term, MEG market is likely to keep firm. Eyes could rest on the warehousing in ports.
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