MEG: sudden drop in syngas-based rate, increased uncertainty in operations

The operating rate of syngas-based MEG units dropped below 50% on July 30, a decrease of about 25% from the peak in mid-July. This reduction includes planned maintenance by Woneng and a temporary closure at Shouyang earlier this week. Additionally, SHCCIG Yulin Chemical in Shaanxi has reduced its operating rate to around 30% due to equipment issues, with both plants expected to return to normal soon. If further reductions occur, such as with Meijin's planned maintenance in early August, the overall operating rate for syngas-based MEG could temporarily drop to around 45%.

Nearly one-third of companies have been using catalysts for over ten months, indicating an upcoming need for maintenance. For instance, there are planned maintenance activities in August and September for Tongliao GEM CHemical, HNEC Yongcheng #2, Jianyuan, and Shenhua Yulin, affecting a total capacity of around 1.16 million tons. Additionally, HNEC Yongcheng #1 plans to shut down after a major overhaul in the industrial park. Overall, syngas-based MEG supply is expected to remain tight in the third quarter.

Apart from the planned maintenance, recent fluctuations in unit operations have also been influenced by factors such as weather and prolonged high-rate operations. Since the MEG price increased in June, companies have been more active in production, with various measures to increase output. The monthly output of syngas-based MEG increased to around 580-590 kt in June and July.

Moreover, the stability of oil-based MEG operations has been generally moderate. Some companies have slightly reduced their rate due to reduced efficiency in treating wastewater under high temperatures. FREP temporarily shut down last week due to a heat exchanger failure and is expected to gradually resume operations. Shenghong Petrochemical has also reduced its rate since mid-July due to issues on the naphtha cracking side and is likely to maintain this level into August.

Outlook for the Second Half of the Year

The MEG market fundamentals are expected to remain positive, with a continued tight supply-demand structure. The increase in external supply still depends on the arrival of U.S. cargoes in the second half of September, while supplies from Saudi Arabia remain low. Current MEG inventory at major ports has fallen to around 600kt, and intermediate inventory levels are also low. The stable supply of domestic MEG is crucial, as the current inventory structure cannot withstand prolonged unexpected shutdowns. Recently, a 900 kt/year unit in Lianyungang has restarted, and attention will focus on its output and rate increase progress.