China's MEG imports to keep low in Nov-Dec

US MEG price receded to around $690-700/mt recently on recovering supply with the restart of Lotte Chemical's plant in Louisiana. However, good demand was heard in South America as well. FD Northwest MEG price was around $950/mt on healthy demand for antifreeze.

More deals for entrepot trade were heard with the arbitrage windows between China and Europe. Meanwhile, with the increase in Japan/South Korea-China freight rate, cargoes via tenders were also shipped to European market. In addition, more enquiries were heard from Indian market. Looking ahead, Kuwait and Iran origin cargoes would be preferentially supplied to Indian market.

In December 2021-Q1 2022, Taiwan Nan Ya #4, US Nan Ya #2, Saudi Arabia Sharq#4, and Kuwait Equate #2 will conduct maintenances, with total capacity at 2.9 million mt/year. Overall supply outside China mainland market would be tight. Coupled with the tax control measures of in November and December, the imported cargo declaration would be slowed down. So MEG imports would keep low in Nov-Dec.

As for the yearly data, total MEG cargo arrivals in Zhangjiagang, Taicang and Ningbo in 2021 decreased sharply by around 25% from the same period last year. Looking ahead, import cargo arrivals are likely to decrease further with the startups of China's integrated projects.

In longer term, the fluctuation of MEG port inventory will narrow and the impact will weaken. The cargo circulation in East China ports has accelerated with the rapid capacity expansion in China. MEG inventory in East China ports remained low in 2021, while inventories in MEG/polyester producers witness larger fluctuation.

In 2022, with further expansion of China domestic capacities, MEG inventories in MEG/polyester plants will have increasing influence on the market.