China's MEG falls below 4,000 yuan per ton

MEG futures for September delivery in Dalian Commodity Exchange slumped Tuesday on rising short positions, weighing on market sentiment. Spot MEG price fell to around 3,930-3,940yuan/mt, close to the average level in 2020. 

MEG price has dropped by nearly 32% since the beginning of 2022 as most market participants used MEG as a short tool in their portfolios due to high inventory level. MEG inventory is expected to decrease in August, but the decrease is quite limited compared with the total number and the durability of the decrease will be short. As for the inventory in East China main ports, slight decrease is expected with less cargo arrivals in mid-August, but the port inventory will increase gain with deep-sea cargo arrivals in the end of August. 

MEG supply from integrated producers is expected to increase with the startup of #3 MEG plant of Zhejiang Petroleum & Chemical (#2 plant of its Phase II) and the restart of Hengli Petrochemical. Operating rate of coal-based units has decreased due to turnarounds. In general, China domestic MEG supply is gradually recovering. 

Supply of short-sea cargoes will remain low. Supply from Canada is expected to decrease by around 20-30kt per month due to the shutdown maintenance and operating rate cut in Canada. However, supply from Iran, Saudi Arabia and the U.S. will remain relatively stable. 

MEG prices are likely to remain rangebound in short term, and are expected to recover slightly with the limitation for September positions in Dalian Commodity Exchange. 

In medium to long term, the market will be still oversupplied with the startups of large integrated units and coal-based units. 

MEG port inventory

MEG tank inventory in East China main ports increased by 17kt week on week to 1,197kt on Aug 15. Tank inventory in Ningbo increased by 17kt to 110kt. Offtake volume in one major terminal of Ningbo was around 2,000 tons per day in Aug 8-14. Inventory in Shanghai&Changshu down 16kt to 82kt; Zhangjiagang 714kt, down 7kt; Average daily offtake volume in one major terminal was around 6,500 tons by truck. Taicang 154kt, up 18kt. Average daily offtake volumes in two major terminals were about 5,000 tons; Jiangyin&Changzhou 137kt, up 5kt.

Plant news

Zhejiang Petroleum & Chemical has recently commissioned its 800kt/year #3 MEG plant (#2 MEG plant of its Phase II), and is expected to get MEG around Aug 20. The company will ramp up the operating rate of this plant to around 100%. The 800kt/year #2 MEG plant (#1 MEG plant of Phase II) will remain closed.

Dalian Hengli Petrochemical plans to restart its MEG plant with total capacity of 1.8 million mt/year on August 18.

MEGlobal has recently shut its 400kt/year MEG plant in Canada without restart timing yet. The rest two MEG plants with total capacity of around 830kt/year MEGlobal in Canada will be running at lowered rate of around 20-30% till end-Sep.