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Insight | Time: Feb 26 2021 11:26AM
Coal-based MEG regains profits on price hike
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MEG futures EG2105 contract broke 5,900yuan/mt and spot price stood around 6,400yuan/mt, leaving spot/futures spread at quite high level. With the rapid increase in MEG price, coal-based MEG cash flow also improved.

After the China market returned from Chinese New Year holidays on February 18, coal chemical producers were active to run at high rate. Coal-based MEG cash flow improved despite rising coal prices. For a 200kt/year unit, the cash flow would reach around 1,700-1,750yuan/mt recently. (The cost here includes freight rate and discount, excludes depreciation and financial expenses.)

Inner Mongolia Tongliao GEM Chemical shut its 300kt/year coal-based MEG unit on February 26 for around one week maintenance. Xinhang Energy has restarted its 100kt/year line of its 400kt/year coal-based unit days earlier than original plan. Operating rate of coal-based MEG units was around 64.9% on Feb 25, up 6.1% from the pre-holiday level of 58.8%.

Despite the better profits this year, the overall operating rate was still lower than in the same period last year. The high level of coal-based MEG units was around 87% in January 2020. According to maintenance/restart recently, the increase in operating rate of coal-based MEG units would be limited in March. The maintenance plan of Qianxi Coal Chemical was still pending. The high rate in March would be around 71% as Qianxi postponed its maintenance considering rising MEG prices. 

Company Capacity Location Maintenance plan
Tongliao GEM 300 Inner Mongolia Feb 26-Mar 4
Xinhang Energy 400 Inner Mongolia restarted 100kta on Feb 26
Yangmei Pingding 200 Shanxi to restart in H2 Mar
Woneng Chemical 300 Shanxi end Mar, 7-10 days
Qianxi Coal Chemical 300 Guizhou Mar, pending

Among the closed units, Yangmei Pingding is likely to restart in the second half of March and HNEC Xinxiang may also restart within March.

Company Capacity Location Restart plan
HNEC Anyang 200 Henan SD Mar 3, 2020; gasifier tech upgrading, won't restart in short term
HNEC Xinxiang 200 Henan SD Dec 30, 2020; has restart plan, waiting for HNEC approval
Hubei Chemical Fertilizer 200 Hubei SD Feb 29, 2020; upgrading, to complete in mid-2021
Yangmei Pingding 200 Shanxi SD Mar 28, 2020; expected to restart in H2 Mar 2021
Yangmei Shenzhou 200 Hebei SD May 2, 2020; upgrading, no restart timing
Tianye 300 Xingjiang SD May 14, 2020; may not restart within Mar

In terms of new capacity, capacity is expected to increase by 1.24 million mt/year in H1 2021 and around 3.4 million mt/year in H2 2021. Shaanxi Weihe Binzhou Coal Chemical has achieved on-specification polyester graded products at its 300kt/year syngas-based MEG unit recently. For large capacities, Hubei Sanning is expected to supply the market in end April or early May. Yulin Chemical has three 600kt/year lines, and is expected start one by one starting from August.
[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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