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Insight | Time: Sep 28 2018 10:49AM
Syngas-based MEG profit narrows on falling MEG but rising coal prices
 
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Many polyester plants cut production in September due to high feedstock prices and accumulating product inventories. Operating rate of polyester plants dropped from about 90% to 78.9% on September 27.

The rapid fall in polymerization rate heavily weighed on feedstock markets. Domestic MEG price for prompt materials fell around 800yuan/mt from end August to around 7,200yuan/mt.

With the rapid decline in MEG price, MEG profits weakened apparently. Loss for MTO based MEG was around 250yuan/mt in mid-week, and pegged at around 90yuan/mt, based on cash flow calculated by prompt prices. As for syngas-based MEG, cash flow of a 200kt/year unit has fell below 1,000yuan/mt.

MEG cash flows of different routes
 
 

As the weather is getting colder, coal storage for winter has started in northern region, particularly in Northeast China. The demand for lump coal has increased significantly, which lends some supports to coal prices. Coal prices were also supported by environmental protection and safety inspection in coal mines, acceleration of outdated mine shutdowns, difficulty in approval for new mines, and output limitations. Coupled with rising transport fees, domestic coal prices are likely to increase.

Syngas (coal) based MEG producers faced pressures of falling MEG prices and rising coal prices in September. Facing the influence of various factors such as coal price and oil price, the growing coal-based MEG industry must speed up technological upgrading and improve its competitiveness in many aspects.
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