Subscriber note: ICIS plans to change the methodology for the CFR China Main Port weekly assessment in the Mono Ethylene Glycol (Asia Pacific) report to the simple average of deals collected throughout the week, instead of the current weighted-to-Friday approach, in order to better reflect a fair distribution of price changes seen throughout the week. For more information, please contact Becky Zhang at becky.zhang@icis.com or Judith Wang at judith.wang@icis.com.
Asia MEG prices rise on supply concerns
Asia monoethylene glycol (MEG) MEG prices were stable in the first two days of this week, but started to rebound from Wednesday when Taiwan’s Nan Ya Plastics’ No 1 and No 2 MEG units were heard to be affected by a fire at a hydrogen pipeline belonging to Formosa Petrochemical Corp (FPCC) in the vicinity, although this was denied by the company.
Nan Ya Plastics is running its four MEG units, with a combined capacity of 1.8m tonnes/year, but is planning to shut them down at separate times for a month-long turnarounds from September.
Another two MEG units from South Korea and several MEG units in Middle East that were shut for turnarounds (Please see production news), will be restarted in September-December. This has increased supply concerns for market players.
Therefore, some traders have started a new round of purchasing activities because they are expecting prices to increase further. However, end-users are confident of the contract supply and did not join in the buying queue as most have sufficient inventory to last 20 days to a month.
Most market players said ample supply is expected to weigh on MEG prices as the bulk of these shipments will arrive in early August. In addition, the macro-economic factors, including European debt crisis and US debt default, will affect MEG market sentiment, the market players added.
Spot market
Asia MEG prices were stable on Monday and Tuesday, but prices rebounded from Wednesday to Friday.
On Monday, two bonded warehouse cargoes were heard done at $1,200/tonne and $1,210/tonne CFR CMP during the day.
On Tuesday, an August-delivery Asia-origin cargo was heard to be traded at $1,205/tonne CFR CMP. Another US-origin cargo was heard to be changing hands at $1,205/tonne CFR CMP. Three bonded warehouse cargoes were also heard to be transacted at the same level.
On Wednesday, an August shipment was heard to be transacted at $1,225/tonne CFR CMP. A prompt-delivery cargo was heard done at $1,218/tonne CFR CMP. A third deal was heard to be traded at $1,220/tonne CFR CMP. An end August-delivery cargo was heard done at $1,215/tonne CFR CMP during the day.
On Thursday, two August-delivery cargoes were heard to be transacted at $1,230/tonne CFR CMP. Two bonded warehouse cargoes were heard done at $1,220/tonne and $1,225/tonne CFR CMP. A mid-August delivery cargo was heard to be traded at $1,235/tonne CFR CMP, but it was not included into the daily assessment as it was too high for most market players.
On Friday, a cargo that has already arrived at port was heard done at $1,225/tonne CFR CMP. A bonded warehouse cargo was heard to be transacted at $1,230/tonne CFR CMP. A second bonded warehouse cargo was heard to be traded at $1,235/tonne CFR CMP.
Downstream demand
The sales-to-output ratio at most Chinese polyester yarn plants remained at above 100% in the first half of this week, but fell to 60-80% in the second half of the week after the downstream textile converters slowed down their purchasing activities because of power restriction at their plants.
Polyester yarn producers in China have sufficient inventory for around four to 12 days this week. The average operating rate at major Chinese polyester plants is stable at around 80%.
The current hot weather has caused some local polyester producers to shut or reduce the operating rates at their plants in eastern Zhejiang province, producers said.
The transaction volumes at the benchmark China Textile City in Shaoxing were at 4.8m-5.1m meters/day, slightly lower than last week’s 4.8m-5.6m metres/day.
Spot margins for partially oriented yarn (POY) have fallen by yuan (CNY) 40/tonne to CNY1,656-1,956/tonne, but margins for polyester staple fibre (PSF) have risen by CNY160/tonne to CNY706-806/tonne, in line with increasing PSF prices.
Contract
Among the MEG majors who nominated their Asian Contract Price (ACP) for August were MEGlobal at $1,300/tonne, Shell at $1,320/tonne and SABIC at $1,300/tonne, all on a CFR Asia basis. The prices represent a decrease of $50-60/tonne compared with their nominations for July.
MEG ACP nominations in 2011, CFR Asia
| Month | List prices | Month | List prices |
| Jan | 1150 | Jul | 1350-1380 |
| Feb | 1220-1230 | Aug | 1300-1320 |
| Mar | 1350-1400 | Sep | |
| Apr | 1350-1400 | Oct | |
| May | 1250-1300 | Nov | |
| Jun | 1250 | Dec | |
Sinopec has finalised its contract price for July at CNY9,600/tonne DEL, down by CNY250/tonne from settlements in June. Sinopec’s nominations for August are at CNY9,700/tonne DEL.
Sinopec monthly contract settlement in 2011, delivered China
| Month | List prices | Month | List prices |
| Jan | 9450 | Jul | 9600 |
| Feb | 10250 | Aug | |
| Mar | 9950 | Sep | |
| Apr | 8950 | Oct | |
| May | 8950 | Nov | |
| Jun | 9850 | Dec | |
Freight
10,000 tonnes: Taiwan to eastern China – $13/tonne
3,000-5,000 tonnes: South Korea to eastern China – $20-22/tonne
10,000 tonnes: Middle East to China – $54-56/tonne
Production news
South Korea’s Honam Petrochemical plans to shut its 250,000 tonne/year MEG line and its 400,000 tonne/year MEG facility at Daesan in October for 45 days of scheduled maintenance.
Taiwan’s Nan Ya Plastics, a part of the Formosa group, plans to shut down its four MEG units one by one from September. Each will be shut down for around one month. The company has a combined MEG capacity of 1.8m tonnes/year.
Jubail United Petrochemical Co (JUPC)'s 640,000 tonne/year No 2 MEG plant in Jubail will be shut down from mid-September for around 35 days maintenance.
Eastern Petrochemical Co (Sharq), a joint venture between SABIC and a Japanese consortium led by Mitsubishi Corp, plans to shut down its 450,000 tonne/year Sharq 2 unit in December for around 10 days and shut down its 450,000 tonne/year Sharq 3 plant in October for around 10 days.
China’s Jilin Petrochemical has restarted its 160,000 tonne/year MEG unit in Jilin on 28 July after it a shutdown on 12 July.
Asian DEG prices are stable on firm co-feedstock
Asia diethylene glycol (DEG) prices remained stable amid firm co-feedstock styrene monomer (SM) values and thin trade this week. The market fundamentals did not change much amid weak downstream demand. Most downstream unsaturated polyester resins (UPR) buyers in China are still consuming their contract supply and they do not have urgent need to procure more cargoes from spot market because of lower operating rates.
Most UPR plants in China are running at 50-60% of capacity amid a low demand season and a power crunch in the eastern manufacturing hubs of Jiangsu and Zhejiang.
Transactions were subdued this week amid a wide price gap between selling/buying indications and weak buying sentiment.
Inventories at the ports were heard to have risen to 105,000 tonnes amid soft demand. In addition, the off-take of DEG cargoes from a major east China tank holder was heard at around 700-800 tonnes/day, stable from last week.
Market players said DEG prices will undergo a downward correction in August because of a lull season in the downstream UPR and polyurethane (PU) sectors.
Spot market
Selling indications for Asia DEG spot cargoes were heard at $1,220/tonne CFR CMP, but bids were mostly at around $1,205/tonne CFR CMP.
A deal for a 1,000 tonne Taiwan cargo for mid-August delivery was heard done at $1,215/tonne CFR CMP. A 500 tonne bonded warehouse cargo was heard changing hands at $1,210/tonne CFR CMP and another 500 tonne bonded warehouse cargo was heard transacted at $1,215/tonne CFR CMP.
Domestic ex-tank prices in eastern China were stable at CNY9,250-9,300/tonne this week.
Covering editor: Judith Wang
($1 = CNY6.44)
This week in ICIS news ( www.icis.com)
28-Jul-11 18:50 Europe PET prices may increase for first time in three months
28-Jul-11 05:55 Asian PET producers hike August offers on higher feedstock costs
27-Jul-11 19:01 Suppliers prepare Europe MEG market for an August increase
27-Jul-11 14:17 Tax dispute forces Lukoil to shut down Bulgaria's sole refinery
27-Jul-11 08:13 Taiwan's Formosa restart plans may get delayed by fire
