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Insight | Time: Aug 17 2021 10:44AM
MEG finds support from buying with price lower than MTD average
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Due to high inventory of grey fabric, production losses and scarce new orders, more water-jet looms in northern Jiangsu were closed and some large-scaled home textile fabric producers closed their machines. Up to August 13, Loom operating rate in Zhejiang and Jiangsu fell to around 74%, and the rate may likely decrease further.  


With the continuous weakness in end-user market, some polyester plants cut output. Polyester polymerization rate was estimated at around 89% Monday and may further decrease to around 87.5%. Looking ahead, eyes could rest on the reduction implementation of Hengyi and Xinfengming. Forecast for August polyester polymerization rate has been revised down, and the supports to MEG market weakens. 

In supply side, Hengli Petrochemical and PetroChina Sichuan Petrochemical closed their plants shortly and ECO Coal Chemical cut operating rate for days. Restart of Weihe Binzhou Chemical was postponed. Recovery in MEG plant operating rate was less than expected. China domestic output was estimated at around 1.1 million tons in August, broadly flat with in July.  

Import cargo arrivals will gradually decrease since August 20 and the recovery in port inventory would be limited. Meanwhile, supply outside China remained tight due to plant shutdowns and rate cut in Saudi Arabia. As a result, China's September MEG import will remain low. Total MEG inventory is expected to go up, but with limit increase. Given the low inventory level in East China main ports, MEG fundamentals are neither stronger nor weaker.  


Looking ahead, some producers in China have maintenance plans and supply outside China may hard to see effective recovery, so China's MEG imports will keep low. Around mid-September, Hualu Hengsheng, Weihe Binzhou and Tianye III are expected to come back to the market. In terms of new capacities, eyes could rest on Gulei, Huayi and Haoyuan. Gulei Petrochemical is expected to commission its MEG plant with its own ethylene in late August. Guangxi Huayi has started its 200kt/year syngas-based MEG unit in Qinzhou in the second week of August but has not achieved MEG products yet. 

Company  Location  Capacity, kt/year  Maintenance plan 
FREP  Fujian  400  Mid-Oct, 30 days 
CSPC #1  Guangdong  400  Oct 20, 50 days 
Sinochem Quanzhou  Fujian  500  in Dec 
Tongliao GEM Chemical  Inner Mongolia  300  Sep, 15-20 days 
Xinhang Energy  Inner Mongolia  400  Sep, 15 days 
Woneng  Shanxi  300  Sep, 30 days 
Yanchang Petroleum  Shaanxi  100  Sep, two months 
ECO Coal Chemical  Inner Mongolia  120  Nov, 30 days 
Lotte Chemical  U.S.  700  Oct, 3 weeks 
Shell  Canada  500  Sep, 30 days 
Sharq4  Saudi Arabia  700  Nov, 30 days 
Nan Ya Plastic  Taiwan, China  720  Dec, 30 days 

After the sharp fall, the current MEG price is much lower than the month-to-date average. Traders are likely to buy at low prices. Eyes could rest on polyester output cut and MEG supply recovery.  

[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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