MEG cargoes reallocates China amid serious Covid-19 situation in India

India's Covid situation continues to remain grim. The country added over 3 lakh new cases for the sixth straight day. In the past 24 hours, a total of 3,23,144 new infections came to light, pushing the case count to 1,76,36,307, according to the Union health ministry data updated on Tuesday. --THE TIMES OF INDIA

Indian polyester industry have been under pressure due to the serious Covid-19 situation. The local polyester polymerization rate was heard had dropped by around 15% to around 60%. Some sources also said the overall run rate cut could be more than 20%, with operating rate hovering around 50%.

Indian polyester capacity is nearly 10 million mt/year and the 15% rate cut could result in around 40,000 tons of MEG demand loss. The further rate cut is also expected.

Operating rate of MEG plants also decreased by around 10%. MEG output is expected to decrease by around 15kt based on 1.85 million mt/year capacity, which is slightly lower than the loss in polyester output. As a result, around 20-30kt Indian MEG cargoes are expected to ship to China in May, and which would arrive in China in May-June.

Meanwhile, Indian is a net MEG importer. If the serious Covid-19 situation could not be control, cargoes to Indian market are expected to be reallocated to Chinese market.

China's MEG imports would apparently increase in end May and early June, with the cargo reallocation and arrivals of US and Iran-origin cargoes. The first batch of US cargoes after the cold snap would arrive in China in end May, and a large quantity of Iranian cargoes would arrive in June.

China's MEG import will increase in June. Coupled with rising China domestic supply, the market would see notable inventory buildup, and the market will likely to flip into contango structure again.