Asian MEG market take a nosedive, downtrend might prove short-lived

The Asian MEG market has been suffering from constant weakening trend after hitting multi-month high during late February 2018. MEG costs based on CFR China term took a nosedive last Friday, plunging $56/ton from the day before to $895/ton – the lowest level since mid-November 2017. This is an inevitable result of surging inventory levels in local China market following the weeklong Lunar New year holidays, which took place on the third week of February.

Market sources estimated an increase of more than 190,000 tons of MEG inventories in China after the Lunar New Year holidays, mostly are the arrivals of import cargoes. More parcels are due to arrive the market in a matter of days; depicting a possibility that prices might fall further in the near term.

“This is especially when many downstream polyester plants are having comfortable on-hand stock and being unable to restore regular operation rate due to lack of manpower,” an industry participant commented.

Falling upstream MEG costs have encouraged PET bottle suppliers to offers discounts of $5-10/ton week on week, though buyers are mostly on the wait and see, hoping to achieve additional reductions.

It is important to note that Northern Hemisphere markets are entering the traditional high demand season approaching summer, which usually boost demand for PET. Players, therefore are expecting a more bullish condition for MEG in the coming month.

Another support for MEG comes from heavy maintenance shutdown season in local China, taking place from April to June. More than 150,000 tons of production would be taken out of the market due to these overhauls, breathe new need to stock up materials into the system. Following are the maintenance schedules: