MEG prices slump despite the shutdown of Shanghai Petrochemical

Shanghai Petrochemical closed its MEG units over last weekend due to the fire. On Monday morning, MEG price picked up shortly due to the accident, but then receded sharply to around 4,900yuan/mt by the late session of Monday.

The drop was mainly due to:

1. Falling crude oil and coal prices

2. The drop in some commodity futures in China

3. MEG port inventory up 57kt to 1,235kt

4. Increasing short positions on high inventory and weak demand

The nameplate capacity of the two units is 605kt/year. However, the 225kt/year No.1 unit has been fully switched to EO production and #2 380kt/year unit was running at low rate. The effective MEG output of the #2 unit could be only around 100kt per year. So the impact of Shanghai Petrochemical fore on MEG market is limited.

Sinopec Yangzi Petrochemical will fully switch to produce EO after the completion of maintenance of its 300kt/year unit. However, it is now uncertain whether the unit could be restarted as planned on June 24 after the accident at Shanghai Petrochemical. If the unit could not be restart as scheduled, EO price is expected to increase. And some producers may lower EG/raise EO operating rate.

Sanjiang Chemical has lowered the operating rate of its 150kt/year MEG unit to the lowest level for more EO output since June 20.