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Views over the recent MEG market
 Recently, MEG market remains rangebound with domestic price hovering around 4,500yuan/mt. At present, polyester market is showing a seasonal rebound. Indicators in the industry chain is improving, lending strong support to MEG prices. However, market players are still cautious to chase up as the supply-demand pattern is fully expected. 

Last Friday, an anecdotal research questioned the accuracy of CCFGroup (CCF)'s MEG data. In order to avoid unnecessary troubles, CCFGroup (CCF) clarifies as follows: 

1. The research pointed out the misinfomation mentioned in an early August MEG cargo arrival report of CCFGroup. 

Clarification: First, the author of this material must not pay close attention to the infomation on CCF website. CCF predicted that about 255kt MEG cargoes were scheduled to arrive in East China main ports, not to arrive at Zhangjiagang. 



Second, it's normal for intensive arrivals in early August. Among the vessels, NCC FAJR with around 80kt of MEG arrive as scheduled. The forecast for cargo arrivals in East China main ports in Aug 1-7 was around 255kt, and the actural arrival was 215kt. Tank inventory in East China mian ports decreased from 1.027 million tons on August 1 to 1.081 million tons by August 8. The rise reflected in shore tank inventory also makes sense. CCF reported about 111kt cargoes to arrive at Zhangjiagang in August 1-7. During this period, offtake was around 62kt. During this period, inventory in Zhangjiagang increased from 630kt to 653kt by August 5, and about 85kt were stored in tanks with only a few ships delayed. 

Third, CCF verifies the vessel infomation in mutiple ways, and also records the vessel names in both Chinese and English. There's no double counting caused by transliteration and liberal translation. 

2. The materials mentioned that the inventory in a major terminal reported by CCF was higher than the actual level. 

Clarification: First, CCF, as a third-party information website, aims to prov real feedback on market data, and reports the real data when publishing. 

Second, the sharp drop of inventory in East China main ports on August 22 should be within expectations, according to the mumbers reported by CCF on August 16 about only around 80kt cargoes were scheduled to arrive in East China main ports in August 15-21. Offtake from ports remained high amid seanol improvement in polyester demand. In August 15-21, offtake from a major terminal in Zhenhai, Ningbo was around 4,000 mt/day, from Shanghai & Changshu around 5,500 mt/day, from a major ternimal in Zhangjiagang around 11,500 mt/year. Offtake from Qingzhi of Ningbo, Jiangyin, and other ports totaled around 28,000-29,000 mt/year. Weekly offtake volume was above 200kt. In August 16-22, about 50kt cargoes were stored into East China main ports, so the drop of 150kt was within normal range. 

Third, it doesn't make sense for storage companies to publish higher inventory mumbers. Their clients wil also check the mumbers for many times, if they think the mumbers have apparent error. 

CCFGroup (CCF), as a third-party website, strives for true, objective and coherent data. If there are any other questions, please contact us. 

Comments on the recent MEG market 
1. Expectations for short-term supply-demand and offtake 
MEG supply and demand pattern will remain healthy in short term. The inventory decrease is expected to persist into October. The healthy supply-demand condition could be also reflected by the drop in shore tank inventory. Due to low prices, recovery in MEG supply was slow both in and outside China, particularly recovery of coal-based MEG in China. As of August 22, operating rate of MEG plants in China was 62.96%, of which the rate of coal-based ethylene glycol was 59.86%. MEG Operating rate of MEG plants remained low in China, while accelerate offtake from ports apparently offset the supply reduction. Coupled with the seasonal recovery in polyester sector and startups of new units, offtake will likely keep high on firm demand. 


2. Localization storage diversion 
Since the third quarter of 2018, MEG has entered an oversupply cycle. Supply-demand situation improved periodically as some plants cut output or shut down units due to low prices. However, overall supply will be still in glut in medium to long term. In 2019-2020, planned startups of coal-based MEG will be around 4.1 million mt/year. While, due to the large investment and weak economic competitiveness of syngas to MEG, startups of some units might be delayed. However, China's refining and chemical integration projects are making rapid progress, and the planned capacity in 2019-2020 are about 3.55 million tons. If these projects run as per schedule with an average run rate of 80%, the monthly increment in domestic production is about 230-240kt, which could replace about 7-8kt of daily offtake from ports. Meanwhile, some volumes are also put into contracted cargo tanks instead. 

Expectations for China's integrated projects to start in 209-2020 
Company Location Capacity, kta Timing
Hengli Petrochemical Dalian, Liaoning 900 Q4 2019
Zhejiang Petrochemical Zhoushan, Zhejiang 750 Q4 2019
Hengli Petrochemical Dalian, Liaoning 900 Q1 2020
Zhongke Refining & Petrochemical Zhanjiang, Guangdong 500 Q2 2020
Sinochem Quanzhou Petrochemical Quanzhou, Fujian 500 Q2 2020


3. Trade mode and full pricing 
With the maturity of MEG futures, it's more common for participating in futures market, which will also affect trading activities of paper market. This could be also reflected in the recent transactions. At present in paper market, transactions were mainly for the current month. In addition, pricing objectives also gradually changed from paper market to futures market. Anticipation of oversupply limits the rebound of futures prices. This's why the market has no strong upward momentum despite continuous inventory decline since May.  
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