MEG market pressured by ample supply

MEG tank inventory in East China main ports increased by 73kt week on week to 1,143kt on Aug 14. Tank inventory in Ningbo increased by 10kt to 75kt. Offtake volume in one major terminal of Ningbo was around 3,500 tons per day in Aug 7-13. Inventory in Shanghai&Changshu up 9kt to 121kt; Zhangjiagang up 5kt to 593kt; Average daily offtake volume in one major terminal was around 10,500 tons by truck. Taicang up 55kt to 162kt. Average daily offtake volumes in two major terminals were about 5,300-5,400 tons; Jiangyin&Changzhou down 9kt to 132kt. Inventory in transit tanks for domestic cargoes increased by 3kt to 60kt.

Last week MEG cargo discharge at main ports was smooth, with discharge volume slightly above 210kt. Despite active offtake, visible inventory still accumulated sharply. This week, MEG arrivals remain high, with main and secondary ports reporting around 190-200kt incoming. Recently, discharge pressure eased at Zhangjiagang trading storage area after additional tank capacity was put in place, but tight capacity continues in the Taicang area, leading to longer waiting times for unloading, especially in the PowerShell Petrochemical. MEG visible inventory will likely stay high in the near term. August imports are estimated to reach around 670-680kt, likely hitting a yearly peak. From late September, MEG imports will moderately decline, mainly due to reduced shipments from the United States and Saudi Arabia, while nearby supplies maintain ample availability.

For domestic supply, some coal-to-chemical facilities have recently undergone maintenance, causing the operational rate of coal-based MEG to decrease to around 62%-63%. Looking ahead, there will be alternating maintenance and restarts of coal-based chemical units, with the operational rates expected to gradually increase later on. In the later part of this month, Xinhang Energy will carry out maintenance, and Yangmei Shouyang in Shanxi will restart operations after a period of shutdown. Yulin Chemical's 600kt /year MEG unit will also restart after maintenance towards the end of the month. Additionally, attention is focused on the restart situation of SHCCIG Weihe Binzhou Chemical's unit. Among traditional units, Jiangsu Sierbang MTO has recently restarted, and following the return of ethylene, Shenghong's 1 million tons/year unit is planned for restart next week, with an expected increase of over 20,000 tons in MEG production this month.

The MEG supply side appears ample, with August-September domestic supply estimated to remain around 1.48-1.50 million tons. New units are still expected from Shaanxi Yuneng Chemical and Zhongkun in October, while the EO market is weak with integrated plants continuously postponing switching actions. For example, Hengli Petrochemical's planned switch to EO is expected to materialize in October, still depending on progress in commissioning its ethanolamine and DMC units. Meanwhile, limited EO sales due to more northern antifreeze plant shutdowns mean the MEG monthly output loss from switching is only around 20-30kt.

Regarding supply-demand structure, MEG is gradually shifting towards oversupply, with a key watch on Asian Games impacts on polyester operating rates in September-October. Looking ahead to November and December, with expected incremental supply in the MEG production process and concerns about negative feedback in the polyester industry chain, the MEG supply-demand structure will weaken. This could lead to the accumulation of social inventory once again, keeping pressure on the MEG market.