Asia monoethylene glycol prices plunged to a 15-month low to $1,019/mt CFR China Wednesday, according to Platts data, due to poor demand and high inventory levels.
"There is too much MEG in the tanks already, and cargoes that are coming do not have tank space," a Chinese trader said. "There is no way [for sellers] to wait, so they have to sell."
Market participants attributed the sudden drop in prices to high inventory levels at storage tanks in the eastern Chinese ports. Market sources estimate there is about 650,000-700,000 mt of MEG stored in the tanks.
MEG stocks have been building up as demand from downstream polyester factories has been lackluster. Orders for polyester has been weak, amid a weak global economic outlook. China's polyester and textile industries rely heavily on exports.
"The textile industry is not doing good as orders are very low," said a market source.
The fall in MEG prices also comes amid the fall in purified terephthalic acid futures. PTA is the co-feedstock for polyester and the MEG market watches the futures market closely. The benchmark May futures closed at Yuan 8950/mt Wednesday, down Yuan 94/mt day on day.
Besides, India, the world's second-largest cotton producer, has also partially lifted a ban on cotton exports a week after it was first introduced March 5. Polyester is used as an alternative to cotton and the ban had initially supported a price increase in MEG early March.
The reversal of the ban has also added downward pressure to MEG prices, but market sources said this was "not much," compared with the already high inventory levels.
