MEG offtake slows down with intensified electricity curbs in Taicang

Two major terminals in Taicang Port have halted offtake after receiving the requirements to curb power usage since September 26, and it is unknown how long the restriction would last. Other ports in Jiangsu province have not received notice to cut power usage yet. In September, average offtake in Taicang was around 5,000 tons per day.

The offtake in Taicang accounts for around 20% of the total offtake volume in East China main ports, and the share has increased further as polyester plants purchase prior the National Day holidays. Spot availability in Zhangjiagang will further tighten after Taicang suspending offtake.

MEG inventory in Taicang accounts for around 21% of total inventory in East China main ports. Around 120kt per month of China domestic MEG cargoes arrive in East China main ports. Among that, around 60% arrival/offtake is in Taicang. The liquidity of China domestic cargoes will slow down after the suspension. Although Ningbo and other ports could receive and load domestic cargoes, the total volume would be still limited.

MEG fundamentals is likely to keep healthy in short term on low imports and pilot shortage. Total MEG inventory is expected to decrease by around 90-100kt in September and is hard to see clear increase in October. Imports are also hard to increase. China domestic output recovers slowly, as some units cut output amid the power restrictions, coal-based MEG margins weaken on higher coal prices and some units restart slowly after encountering problems.

In demand side, the cut back on electricity is ongoing and eyes could rest on further reduction in polyester plants.

MEG market is likely to remain firm, unless polyester plants reduce production on a large scale.