Mono Ethylene Glycol (MEG) prices in China have remained under pressure since the beginning of the month due to weakness in values of upstream crude coupled with slow demand pattern. Pressure over the mounting inventory levels have been exacerbated by the buzz of resumption of coal-based MEG plants in China.

Supply of Mono Ethylene Glycol (MEG) has already been ample since the beginning of Q4 as majority of buyers sidelined their purchases due to pessimistic demand prospects in the local as well as international market. However, in October, stringent regulations following the dual control policy in China led to a temporary halt in the production of several coal-based MEG plants which in turn provided temporary relief to the inventory piles. As these coal-based MEG plants which were earlier shut, are gradually coming onstream, this has again stressed traders compelling them to allow consistent negotiations to initiate offtakes.

MEG plant with capacity of nearly 200 KTPA in Henan which was scheduled to a halt in October came onstream in early December. In addition, two other plants with capacities of 500 and 300 KTPA respectively, resumed production in the first week of December. Besides this, an upcoming plant of 800KTPA MEG plant Zhejiang Petrochemical's with a scheduled completion in the second quarter of 2022 continued to stress the market players over the exhaustive supply.

MEG values have already tumbled by nearly 5% in the first week of December. In tandems of the widened demand and supply gap of Mono Ethylene Glycol (MEG), manufacturers have been heard to be operating their plants at nearly 55%. Demand performance of MEG is likely to remain low till the Spring Festival in the country. As per ChemAnalyst, “Supply overhang due to spate of MEG plant resumptions and installations are likely to keep its prices in a stable to narrow range in at least till the first half of 2022. Traders are likely to delay stocking activities until there are prevalent cues for demand revival from polyester market.”