MEG follows the drop in crude oil

Crude oil prices and stock markets in Europe and U.S. decreased early this week. In China market, MEG prices decreased along with the decline in chemical commodities. However, the market may not show a clear uptrend or down trend.

**Q1 supply surplus revised down to less than 400kt

Estimation for February average polyester polymerization rate has be revised up from 83% to 85% and might be further adjust to 87% given the feedback from polyester plants. Given operations of Far Eastern Union, Fund Energy and ZPC, and the slower recovery of Weihe Binzhou, Yoncheng and Jianyuan, China domestic output increment would be limited in the first quarter. Our estimation for the Q1 supply surplus has been revised down to around 400kt or even lower. The surplus in Feb would be around 250kt, which was not very high compared with in the previous years.

Total MEG inventory was around 2 million tons by the end of 2021, around 1 million tons lower than the highest level within 2021 and slightly lower than end-2020.

Stand-alone ethylene-based MEG cash flow has turned positive, but cash flow of naphtha-integrated MEG remains negative. In short term, MEG prices are expected to keep fluctuating. Eyes could rest on crude oil and the actual output of coal-based MEG. For the whole year, the market may not show clear rebound or see favorable margins in anticipation of supply glut and recovery of coal-based MEG.

--zcf@ccfgroup.com