China's MEG imports to increase on weakening demand in Europe and India

MEG price in Northwest Europe have decreased since May with FD price falling to around 790 euro/mt last Friday. The spread to China's MEG price has also narrowed. Due to higher prices, suppliers give priority to the European market, leading to ample supply in European market. Meanwhile, MEG demand in antifreeze is weak and PET plant operating rate also decrease due to higher costs.  

In Indian market, Reliance has ramped up MEG plant operating rate by around 15-20% to full capacity. With the supply recovery in Indian local market, import demand will also weaken. With weakening import demand in India and Europe, some deep-sea cargoes may be reallocated. For example, Iran origin cargo shipments to China may increase in June-July, and the supply cut of Saudi Arabia's cargoes to China may be limited. Focus could be on the plant operations in Iran and Saudi Arabia. 

US cargoes supply has recovered since the beginning of the second quarter with plants coming back from shutdowns in the first quarter. However, with the decrease in PET plant operating rate on tight acetic acid supply, MEG demand has also weakened. This also leads to higher MEG shipments. Around 60kt May loading cargoes are expected to arrive in China in late July. In July, eyes could rest on the implementation of Nan Ya 828kt/year plant shutdown on poor economics. The cancelation of this plant could offset the increment from GCGV. 

Deep-sea cargo supply is likely to keep stable or increase slightly. Eyes could rest on plant operations.

Supply from Japan and South Korea to China will keep low due to capacity exit and extended turnaround. Malaysia's PRefChem has not resumed normal operation at its cracker and the restart of its 750kt/year MEG plant has been postponed again without clear timing yet. The company originally planned to restart the MEG plant in late June. In Singapore, operating rate has decreased due to weakening profits. Supply from Singapore to China keeps low with more cargoes reallocated to Europe and Southeast Asia, and is expected to decrease further in July-August due to turnaround. Supply from Taiwan decreases apparently with extended turnarounds of Nan Ya. The supply is hard to increase before the restart of #4 plant in mid-September. 

In general, China's MEG imports will keep decreasing in the capacity expansion cycle. Some units have been already scrapped in Northeast Asia. However, deep-sea cargoes still have cost advantages and the impact of demand in other markets has increased. 

China's MEG imports are expected to increase in July-August with more cargoes to be reallocated to China on weakening demand in Europe and India.