MEG supply glut to continue in February

China's MEG market will still be oversupplied in February with inventory build-up (oversupply in total MEG supply) estimated at about 200kt. 

MEG inventory in East China main ports stood at 1.1 million tons at the end of January. Cargo arrivals will be intensive in the first half of February according to the shipping schedule, and MEG shore tank inventory is expected to reach 1.2 million tons. 

At present, the remaining tank capacity in Ningbo and Taicang is tight. As a result, MEG floating inventory will increase. 

In terms of China domestic supply, Fund Energy has a 10-day maintenance plan for its 500kt/year MEG unit in the second half of February. Satellite Petrochemical closed a 900kt/year MEG plant at the end of January for about 15 days of maintenance. Zhejiang Petroleum & Chemical also plans to reduce the operating rate of its MEG plant to about 60% in mid-February due to the turnaround of one of its crackers. 

The start-up of Shenghong Petrochemical's 1 million mt/year #2 MEG line has been delayed without clear timing. 

However, the recovery in demand was slower than previously expected on slow resumption of work after the Chinese New Year holiday. 

At present, market participants mainly choose to observe. The MEG market is likely to remain weak in the short term. Eyes could rest on the recovery of polyester polymerization rate. Effective inventory reductions would occur in the second quarter of 2023.