DCE MEG futures slump after days of increase

On September 30, MEG futures hit the record high since launching in DCE, but then fluctuated to the downside. EG2201 hit the limit down in late session on October 13 with the drop reaching 618yuan/mt.

The sharp drop of MEG prices Wednesday mainly due to the weakening sentiment caused by the drops in commodity futures and profit-takings as well after the price increase previously.

Ethylene-to-MEG margins improved with the previous price increase and syngas-based units with equipped DMC also saw improving comprehensive margins. Fund Energy is still running high despite weakening margins. Sanjiang Chemical has already restarted and has plans to raise MEG output. Operating rate coal-based MEG units was now around 45% on Oct 13 and of the rest units around 75%.

Outside China, with the price increase in China and rising associated gas output with higher oil prices, overall operating rate has increased despite the force majeure of Shell Canada. MEG prices remained firm in European and US markets. Coupled with the maintenance delay of Nan Ya US plant and the upcoming startup of JUPC3, overall supply outside China is expected to gradually increase in the fourth quarter.

In short term, MEG prices are still expected to increase, as the shortage in pilot sustains and there is no signs of decline in coal price. Eyes could rest on oil/coal prices and when the port inventory could turn going up.