MEG: Will the Spring Come?

 Recently, because of the surged inventory and weak demand, MEG price experienced great fluctuation, especially last Thursday (Feb. 21st), the overseas price slumped 35 dollars to 1,125 dollars/ton within a day, down 3.02%.

The MEG market is still very mild now. However, the downstream factories will enhance the operation step by step, so the demand may improve further. As the cost is still high, the aftermarket of MEG could be favorable.

Last week, the whole polyester market in China was still immersed in the festival atmosphere. The demand was very weak and the operating rate of looms in the downstream market was at a low level. The polyester manufacturers mainly used the inventory which stocked before the Chinese New Year and were lack of purchasing impulsion. Therefore, their demand for MEG was weak and led the MEG price stay mild. After the restart of the MEG devices that had turnaround before, the supply of MEG became surplus. The Yangtze River International Terminal was even blocked by full-loaded MEG tanks. The MEG price was also suppressed by this situation. However, as the production of downstream manufacturers became normal and the operating rate of downstream looms improved, the demand for the upstream material would increase and the MEG price would upgrade too.

As for the MEG devices, Saudi Kayan Petrochemical started the turnaround of its 650,000 ton MEG device on Feb.10th and the maintenance time would last for 10 days. In the end of January, Saudi Yanbu Petrochemical restarted its 770,000 ton MEG device that maintained since Nov.25th last year. Saudi Rabigh Petrochemical restarted its 600,000 ton MEG device at the beginning of this month. Taiwan Nanya began the turnaround of its No.4 MEG device (720,000 ton/year) and the maintenance time would last for 2 weeks. The 500,000 ton Methanol to MEG device in Ningbo Heyuan had already produced qualified products and its daily output was 1,000 ton.

At present, the MEG market is still supported by the cost side. Although the oil price fluctuated greatly, the PX price was still strong and stayed above 1,400 dollars/ton. Under this condition, the MEG market also turned stable and stopped dropping. Besides, as for the MEG manufacturers, the profit has reduced to near 120 dollars due to the slump of MEG price, which was 50 dollars less than it before the Spring Festival. The reduction of MEG profit also limited the decreasing space of MEG market.

Judged from the whole chemical fiber market, the prosperity of the market was unstable but improved to some extend. According to the monitor of Commerce Department China-Shengze Silk and Chemical Indexes, the January Prosperity Index of the Market increased 2.35 to 111.88 points. Among the indexes, the Prosperity Index of Chemical Fiber increased 2.19 to 112.05. Thus, the whole chemical fiber industry turned better under the warmed macro economy and the chemical fiber material price was also strengthened by this.

To sum up, the recent weakness in the MEG market might be temporary, once the downstream market operated normally, the MEG market will become prosperous. The spring of MEG market will finally come.