January MEG surplus estimation revised down

Polyester sales ratio improved last week. Product inventories decreased with POY inventory falling to around 15 days. End-users may keep stocking feedstocks before the Chinese New Year (February 1), but the overall procumbent was weaker than last year.

With the dissipation of inventory pressure, some polyester plants raised operating rate. Polyester polymerization rate was 88.4% on January 12, and estimation for January average polyester polymerization rate has been revised up to around 86%. Therefore, the estimation for January MEG supply surplus has been revised down to around 100kt.

In short term, MEG market could find supports from firm crude oil prices and higher polyester polymerization rate. MEG prices are likely to keep firm.

In medium to long term, the supply glut will sustain with estimation for the surplus around 350-400kt in January-February. MEG port inventory is expected to increase. Moreover, inventories in MEG producers also increased in the recent two months. So spot availability is likely to keep increasing.