The rumor of Sinopec 20 pct output cut proved false

The rumor that Sinopec will cut output by around 20 percent has been proved false.

Market participants were talking about that Sinopec Chemical Department had noticed its affiliated companies to cut operating rate by 20%. The rumor mentioned that Sinopec South China Branch and East China Branch will gradually lower operating rate. PetroChina and other coal chemical companies have not lowered operating rate.

CCFGroup have reached comments from multiple sources of Sinopec about this and it has been proved that there would be no such output reduction in chemical products.

In addition, the rumor has not mentioned which product that Sinopec would reduce output. And the description about PetroChina and coal chemicals were also ambiguous.

Some market participants said that MEG futures moved up because of the output reduction concerns.

However, the rise in MEG futures market was boosted by the plant shutdown of Lotte Chemical US and the EO/EG switch back of Sinopec.

Lotte Chemical has recently declared force majeure (FM) on MEG produced at its Louisiana 700kt/year MEG plant due to power outage. It is still unknown about the restart date.

EO market has recovered gradually with East China price up to around 7,700yuan/mt. Since last Friday, some producers, such as Fund Energy, Sanjiang, ZRCC and FREP have raised EO output, which will lead to around 1,500-1,600 tons of MEG output loss per day and a 3% of operating rate decrease. ZRCC will start its new EO unit in late Feb and then its EG output will also be reduced accordingly.