Syngas-based MEG runs revised higher despite margin pressure

-China's syngas-based MEG sector is entering a new turnaround peak in July, with shutdown plans at Yankuang, Zhengdakai, Yangmei Shouyang and Hongsifang.

-Several maintenance schedules have changed, pushing the July operating-rate forecast clearly higher than earlier expectations, with output now estimated at around 640kt, up 40-50kt from the previous low-end forecast.

-Cash flow has weakened sharply as MEG prices fell to slightly above 4,200 yuan/mt while coal costs stayed near this year's highs, though low margins may not curb near-term operations materially and the impact could become more visible by late Q3 or Q4.

July run-rate outlook revised higher

China's syngas-based MEG operating-rate forecast for July has been revised higher as several producers adjusted their planned turnarounds. The sector is entering a new maintenance peak, with shutdown plans at Yankuang, Zhengdakai, Yangmei Shouyang and Hongsifang. However, changes to previously scheduled turnarounds mean July supply is now expected to be higher than earlier low-end estimates.

Turnaround schedules shift

Hongsifang had planned a turnaround from early to late July, but the unit shut earlier in late June because of catalyst issues, shortening the planned maintenance period to 20 days. Tianye had planned a one-month July turnaround, but the shutdown is now expected to be postponed to August, with the duration unchanged.

Yangmei Shouyang's turnaround has been delayed to around mid-July. Yankuang, previously scheduled to shut from 1-Jul to 28-Jul, now plans maintenance from 5-Jul to 1-Aug. Weihe Binzhou Chemical, which had been expected to shut in July-August, may postpone its turnaround to August-September. Yanchang Petroleum currently has no July maintenance plan.

Some restart plans also remain unclear. Tianying had planned to restart in late June, while Xinrun Energy had planned to restart in June-July, but neither has confirmed a restart date.

Based on the latest assessment, China's syngas-based MEG output in July is preliminarily estimated at around 640kt, up 40-50kt from the previous low-end expectation.

Cash flow weakens as coal stays high

Beyond scheduled maintenance, weaker product economics may gradually affect producers' willingness to run. Crude prices have fallen sharply as Middle East geopolitical tensions eased, dragging MEG prices lower to slightly above 4,200 yuan/mt.

Coal prices, however, have continued to rise, supported by tighter safety inspections in production areas and peak summer power demand. Although coal prices eased this week, they remain near this year's highs. Higher feedstock costs and weaker MEG prices have sharply compressed syngas-based MEG cash flow, with some marginal units now close to production cost.

High runs likely in the short term

The impact of weaker margins may take time to appear. The period of low profitability has been short, and MEG producers had previously enjoyed strong margins, giving them higher tolerance for current cost pressure. A clearer impact on syngas-based MEG operating rates may not emerge until late Q3 or Q4. In the near term, the sector is still likely to maintain high operating rates.