China's H1 MEG import drops 23%, limited recovery room for H2 2021

According to China Customs, MEG imports of China in the first half of 2021 totaled 4.338 million mt/year, down around 1.278 million tons or 22.8% from the same period last year.

Cargo arrivals in China remained low in January-May. However, June arrivals and discharges increased with delayed end-May cargoes rolling into early June. June import recovered to around 820kt, with the increase mainly contributed by cargoes from Iran, the United Sates, and India.

Imports from Saudi Arabia, Taiwan China, Iran, the United States, Kuwait, South Korea and India decreased apparently. In particular, imports from Saudi Arabia and Kuwait dropped sharply due to shortage of associated gas on less oil output. Overall operating rate was low in the two countries.

MEG imports in January-June 2021

Operations of MEG plants in the United States were unstable in the first half of 2021 with around 400kt production lost due to the massive shutdown affected by the cold snap in mid-February. In May, due to the bad weather, Lotte Chemical and Nan Ya Plastics US Corp shut units for several times. Currently, Sasol and Nan Ya were running at lowered rate due to ethylene shortage.

Supply from Iran decreased apparently in H1 2021 due to the annual maintenance of Marun, Farsa, and Morvarid which last for around 1.5-2 months. Meanwhile, the restarts were slower than the original plan, so the actual output loss was apparent.

Low operating rate could also been seen in South Korea and Taiwan China. MEG economics remained weak in H1 2021, despite the short-term recovery buoyed by the cold snap. Due to poor economics and tight gas supply, overall supply decreased apparently in H1 2021.

European and U.S. MEG prices remained higher than CFR China level due to global supply contraction. More cargoes were shipped to European market on better economics. Cargoes were also exported from China to Europe when the arbitrage window was opened.

The recovery of China's MEG imports would be limited in the second half of 2021, and the increment will depends on whether JUPC 3 and PRefChem could start. JUPC3 plans to commission in the third quarter while shipment to China would be around the fourth quarter. PRefChem plans to restart its cracker in August and MEG plant in the fourth quarter. Eyes could rest on the two plants. In the fourth quarter, Lotte Chemical in the US, JUPC2, Sharq4 all have maintenance plans with total capacity around 200 million tons/year.