Asian prices for monoethylene glycol are expected to remain under pressure this week because of record-high inventories, in spite of China's rebounding downstream polyester market, industry sources said Monday.
MEG inventory levels in China have grown to 960,000-980,000 mt as of Monday, compared with 900,000-910,000 mt a week earlier, according to sources. Market participants consider inventories of 400,000-500,000 mt as healthy.
MEG is a key feedstock for polyester. Sources said China's polyester market started to rebound in early May, as the country's textile sales hit a one-year high of 9.2 million meters per day. Last week, textile sales were stable at around 8.5 million m/d.
"As a result of healthy textile sales, polyester filament inventory is coming down, which may increase polyester plant operating rates in China," said a Chinese polyester market source.
Yet the Asian MEG market was weaker, despite the firmer downstream conditions. Early Monday, the CFR China MEG price was hovering at $1,000/mt, down $2/mt from Friday.
"MEG inventory in China is very high, with high MEG plant operating rates globally," a Japanese trader said. "Lots of spot MEG cargoes are available from the Middle East. The balance in the Asian MEG market is very heavy."
Sources said the Asian MEG market would likely encounter further selling pressure this week, citing the wide spread with feedstock ethylene.
The MEG spot margin -- based on CFR Northeast Asia ethylene and CFR China MEG -- was calculated at plus $396/mt Friday.
"Even though MEG supplies are heavy, the spread is still very good, which means the Asian MEG market has some more room to fall," the Japanese trader said.
