MEG inventory to increase slightly in Sep

MEG prices surged last Friday with spot prices up to around 5,160-5,170yuan/mt on the shutdown of Sanning and concerns about the supply in North America.

As of Monday morning, MEG plants of Nan Ya, Lotte Chemical, MEGlobal and Sasol in the Gulf Coast remained running, unaffected by Hurricane Ida. Shell has closed its two MEG plants with total capacity of 380kt/year in Geismar, Louisiana last week.

Currently, MEG supply remains tight in North America and MEGlobal's plants in Canada are still under maintenance. Meanwhile, Nan Ya and Lotte Chemical also have maintenance plans in October. Overall supply in North America is likely to keep tight throughout within 2021. Only a small amount of term contract cargoes could be exported to China while spot supply would be quite limited.

China domestic MEG supply will also resume after the restarts of Satellite #1 and Gulei. In terms of coal-based MEG, Hubei Sanning and Hualu Hengsheng are restarting their units; Weihe Binzhou will also restart; in mid-Sep, Xinhang, Tongliao GEM and Woneng will have turnarounds. Operating rate of coal-based MEG unit will remain around 50%. Eyes rest on the startup of Guangxi Huayi. Sep import will also decrease given the unexpected shutdowns of Sabic's plants and plants in Iran.

Overall MEG supply will keep ample in Sep with total inventory buildup estimated at around 50-70kt. However, port inventory is likely to keep low for a while, so market sentiment remains cautious.

This week, polyester plants also have plans to lower prices to boost sales, and the sales ratio might be better than the previous sales. PFY inventories will decrease gradually. Meanwhile, in end-use market, some mills started turnaround and some resumed operation. The further decrease in polyester polymerization rate might be limited.

We think that the demand in Sep-Oct has been partly put forward, but domestic sales may still improve in Sep compared with in Aug.