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Insight | Time: Mar 20 2019 1:37PM
MEG spot availability still in surplus
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MEG market remained weak recently with prompt price down below 5,100yuanmt again.Enquiries for prompt and late March materials were moderate, and some traders in short of contract supply were active to buy. Buying interests for prompt materials boosted by news of VAT cut, however, the momentum failed to last for a long period. Prompt prices slipped as selling was still active at high level due to ample availability.

In fundamentals, MEG supply and demand structure is expected to be broadly balanced in April and May. However, the weakness is mainly caused by high inventory and surplus spot availability. According to CCFGroup, MEG inventories in all sectors increased by about 550kt in January-February. The current inventory level is more than doubled compared with the level in early 2018. MEG inventory/consumption ratio increased rapidly with the rise in total inventory.

The ratio increased to about 53 days by end February, due to polyester output reduction during Chinese New Year holidays. While the ratio has not decreased apparently despite recovery in operating rate of polyester plants. MEG inventoryconsumption ratio is expected to maintain at about 45 days in April-May, apparently higher than average level in the past three years. 

In terms of inventory structure, proportion of port inventory increased notably, reaching 57% by end February. Polyester plants mainly took contract goods recently, and the demand for spot materials was moderate.

MEG inventory structure: proportion in East China main ports increased

In demand side, operating rate of polyester plants stood higher than 90%. However, buying from end-users was moderate. Polyester product cash flows were good while sales ratio was modest. Polyester product inventories increased slowly amid weak sales. It's uncertain whether polymerization rate would be higher than expected amid improving cash flows.

[RISK DISCLAIMER] All opinions, news, analysis, prices or other information contained on this report is provided by analyst of Zhejiang Huarui Information Consulting Co., Ltd (CCFGroup) as general market commentary and does not constitute investment advice. CCFGroup will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
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