MEG: Tank Capacity Stretched at Some Terminals, Watch for Offtake Sustainability

Since June, with the increase in arrivals of US and Iranian cargoes, MEG port inventory has rebounded again. By the beginning of this week, MEG port inventory in East China main ports rose close to 1.09 million tons, approaching the high level in early March. According to China Customs, China imported 621kt MEG in June, basically in line with unloading expectations. Looking ahead in July, MEG imports are expected to rebound to around 650kt.

With the significant increase in imported cargoes, tank capacity in some terminals has become tight, with pressure being especially apparent at Changjiang International, Zhangjiagang and PowerShell Petrochemical, Taicang. Since 2020, MEG imports have continued to decline, and some terminals have adjusted tank capacity, with some MEG tanks being switched to methanol, palm oil and other products, resulting in a noticeable decrease in MEG storage capacity. Taking Zhangjiagang as an example, current MEG tank capacity is only around 70% of the level in the same period of 2019. As of this Monday, tank usage at Zhangjiagang Changjiang International was close to saturation. Additionally, Yizheng still has some spare capacity, but cargo owners currently have weak intention to switch ports. Taicang PowerShell Petrochemical faces a similar situation. Previously, due to tight methanol storage tanks, the terminal appropriately adjusted some capacity to methanol products, and current MEG tank capacity is only around 20,000-30,000 tons. From late this month, with the gradual arrival of deep-sea contract cargoes and some domestic cargoes, congestion pressure will gradually become apparent.

Overseas vessel arrivals will still be concentrated in late July. In addition to the impact of cargo transfers between ports, the sustainability of offtake will be especially important. After experiencing continuous inventory declines in the second quarter and significant tightening of inventories in the midstream, recent offtake from coal chemical producers has been slightly tight, providing moderate support for port offtake. Recently, some traders' vessel arrivals have been slower due to limited tank capacity, with moderated restocking actions ahead of delivery period. Spot differentials have strengthened slightly in recent days. Going forward, pay close attention to the sustainability of offtake.

Looking at the demand side, polyester operating rates are currently at high levels, providing strong support for MEG, and polyester product inventories are controllable with the industrial chain performing relatively well. Recently, there have been expectations of some PET bottle chip plants reducing operating rates, but this has not been heard from other enterprises. Going forward, pay close attention to changes in polyester operating rates.