MEG Market Struggles with Oversupplies and Pricing Pressures Across the Globe

The manufacturing sector in the United States is currently facing ongoing challenges, particularly with a significant decrease in new orders for Mono-Ethylene Glycol (MEG). This decrease in orders has put significant pressure on production lines in the Eurozone and the United States. Meanwhile, the Asian market continues to be oversupplied due to an influx of MEG shipments from the United States.

However, there is some strength in the demand segment now, as polyester production rates are maintained at around 92.5% to 93%. Companies seem to be managing their product inventories well, and there is enthusiasm for production in polyester factories. Nevertheless, the MEG market faces challenges in terms of supply and demand. Apart from the pressures from imported MEG, the high domestic production is contributing to an overall increase in supply in the Asian market.

In August, there was a notable increase in foreign vessels arriving with MEG shipments. This was due to a strong overseas supply, particularly from the United States. However, some vessels experienced delays in docking at the end of July due to adverse weather conditions. By the end of last week, approximately 550,000 tons of MEG had already arrived at the primary port, and subsidiary ports like Jiangyin, Changshu, Changzhou, and South China have observed smooth arrival processes.

Soon, the MEG market is expected to remain under pressure due to excess port arrivals and the challenge of reducing visible inventory. Recently, a storage facility in Zhangjiagang resumed its MEG warehousing operations, and there are plans to receive U.S. MEG shipments in the future. This indirectly highlights the limited storage capacity and the ongoing trend of excess arrivals at the port.

Meanwhile, the contraction in MEG imports in September is anticipated to be modest. For example, MEGlobal's 750kt/year unit has resumed normal operations, and the Nan Ya unit 1 in the U.S. is expected to restart in early September. Additionally, following the successful restart of Shenghong Petrochemical's Unit 1 in China, domestic MEG production rates have increased to around 65%. Product deliveries are planned from Yangmei Shouyang, and the restart of SHCCIG Weihe Binzhou Chemical's facility is also on the horizon.

Consequently, ChemAnalyst forecasts a potential decrease in the price of MEG in the upcoming weeks due to the surplus supply in the region. Consequently, the MEG market remains under pressure because of its unfavorable fundamentals and the presence of high inventories at ports. Looking ahead, special emphasis should be given to the changes in the production rates.