MEG market update: Gaps in arrival schedule and ongoing decline of port inventories

MEG futures demonstrated an increase in open interest in the night session Tuesday, though prices trended downward, reflecting continued market weakness with spot transactions closing between 4,325-4,330yuan/mt on Wednesday. The weakness continues despite no significant fundamental shifts and a decent de-stocking observed in Q2.

De-stocking Trends:

Since March, effective de-stocking has removed approximately 130kt, with a total of around 300kt cleared between March and April. Despite this reduction, port inventories have increased since late February, prompting cautious market sentiments. Previously, de-stocking primarily affected hidden inventories, including raw material stockpiles at polyester factories, upstream factory storage, and coal chemical yard inventories.

Port Inventories and International Supply:

Recent months have seen noticeable declines in inventories at Taicang, Ningbo, and other ports. Starting this week, fewer international ship arrivals and improved outflows from trade storage areas are expected to reduce Zhangjiagang inventories. With the conclusion of futures delivery and moderate stockpiling before the Labor Day holiday, improvements in Zhangjiagang shipments should persist.

Overseas Supply Dynamics:

In the Middle East, supply dynamics are mixed. The mid-month restart of Saudi Arabia's Sharq2 450kt/year unit, brings all regional units online, potentially increasing supplies to China by June. However, regional conflicts continue to disrupt logistics, causing some shipments to bypass the Suez Canal and extending delivery times into early June.

Conversely, Iran anticipates high output in May, projecting 80-100kt. Nonetheless, extended maintenance at the BCCO unit and a halt in subsequent contracts will sharply reduce Iranian supplies starting in June.

In North America, U.S. supplies remain routine, with Nan Ya's 2# unit expected to restart by month-end. No recent tender goods have been reported, and May supplies are low, though a recovery is anticipated in June. Canadian operations are stable, maintaining consistent supply levels. Other near-ocean supply continues to be low, with MEG imports expected to be around 550kt in May.

Port Arrivals and Future Outlook:

Feedback on storage area arrival schedules indicates minimal intake for the first half of May, especially in the Taicang area, expected to be between 50-60kt. In the Zhangjiagang area, despite moderate early May arrivals, figures will decline mid-month. Overall, early to mid-May port arrivals will be low, but as shipments from main ports improve, visible depletion of MEG stocks will gradually become evident. Key developments to monitor include the resumption of coal chemical plants and operational dynamics at units such as Satellite and Shenghong.