First Half MEG Market Trend Review & Second Half Outlook
Author: Jul 14, 2011 16:45
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168Tex News: Ⅰ.Summery for the first half of year
1. MEG price trend review and influencing factor analysis
 Picture1 2011/1-6 MEG Trend Graph
In the first half of year, there are four wave trends. The bottom price was 8500CNY/t, namely $1090/t, between the end of Apr and the beginning of May, while the peak price was 9950CNY/t, namely $1275/t in the mid-Feb. In Jan, for the crude oil price jump and the 2011 contract fell into difficulty, for the increased domestic demand and low abroad supply, the aftermarket was expected to be tighten up, in addition with terminal docking problems, some plants buy in to cover inventory, which boost the price jump high after the spring festival. But after the price mounted up to $1270-1300/t, inventory notably increased. Buyers do not follow up, the market shows a consolidate trend. Since March, under the policy of high stock, tightening macro policy, market price slumped. Since the beginning of April, the price was consolidating around $1100/t, namely 8700CNY/t. After two-month adjustment, it came across the problem of safety checking and long term suspend production problem in the end of May, which boosted the market price up again. But with no less supply as expected and sabic shipping date brought forward, it come into a consolidate trend in June again. Currently, the price was around $1210-1220/t, namely 9300-9350CNY/t.
2. MEG production condition analysis
For the restriction of production technology and feedstock supply, domestic MEG development is relatively lagged behind. Productivity is mainly in the two state-owned enterprise-- Sinopec, Petro China. In the recent years, domestic MEG productivity expansion is less, there is no new equipment put into production. By the end of June, 2011, production is maintained around 3744thousand ton per year, total output is around 1540 thousand ton. For no new equipment put into production, while demand increased, overall operation rate increased slightly, production was also increased by 450 thousand tons.
Table 1 2010-2010/1-6 MEG device load and output statistics (unit: ten thousand ton)
From Jan to Jun, domestic MEG load was weakened from 90% in Jan to 76% in Jun. Mainly because the market continued the ten-year storage-tank tension situation. There is no new MEG production release, there is some stock, leading to the situation of over stock, over supply, MEG load reduced.
3. MEG import situation analysis
The total MEG importation was 2761.8 thousand ton, and average import price was $1156/t, see from the importation in the first half of year, MEG new production is low, people look well on the market in 2011, leading to more stock covering, boosting importation in Jan hit the new peak ever since. For influence of traditional spring festival in Feb, importation is relatively low, which was around 390 thousand ton, but after Mar, the importation jumped up again. Comparing year by year, it decreased 90.5 thousand ton, and the monthly importation also decreased to some extent, only Jan exportation was more than that of last year. See from the average unit price imported, it increased for the whole year increase in 2010. The average import price from Jan to May was increased by $229/t, the increase amount was around 24.7%.
Table 2 2010-2011/1-6 MEG Import Amount (Unit: ten thousand ton, dollar/ton)
4.MEG consumption situation analysis
2011, there is hardly any productivity expansion, the aftermarket was expected to tighten up, thus buyers buy in largely. In addition with the stable out abroad supply, generally speaking, 2011 continued the over supply situation of 2010. Storage tank was in shortage, see from poly industry, MEG over supply amount is estimated around 120 thousand ton/month. After all, there are some MEG used for antifreeze solution and etc, so the actual supply and demand situation is better than this.
Table 3 2011/1-5 MEG supply and demand (unit: ten thousand ton)
See from stock in the end of month, the whole market continued the high stock situation, while the price mounted up gradually in Jan-Mar. Buyers buy in to covering shortage, the overall stock amount rose up to the peak of 700 thousand ton in Mar. Afterward, for the influence of over stock in the warehouse, MEG price notably fall back. During the fall back process, importation amount was reduced, to lower down stock amount.
5. MEG gross profit analysis
 Picture 2 2011/1-6 MEG gross profit
Currently the main production method is ethylene production method and natural gas production method, while natural gas production methods is comparatively lower, but lacks accurate cost calculate formula, domestic plants adopt ethylene production method. The above picture is to use ethylene as feedstock to calculate gross MEG profit picture. Of course, different situations may be in different plants, different manufacturers may have different cost, but it reflected the general trend. In the first half of year, the gross profit margin is well, but in Apr and May, with MEG price drops, MEG profit shrank. MEG profit margin enlarges with it came into June, with ethylene price down and MEG price slightly increased.
2. Second half of year outlook
There is no new MEG equipment put into production this year, currently, the productivity reaches 3747 thousand ton per year, with the overall tighten supply in the second half, and most plants had covered some stocks, making MEG future supply tightened. Now MEG profit is generally good, and the equipment operation rate stays high. Another point, the load shedding pressure will lower down overall need in the third quarter.
Picture3 2004-2010 MEG market average price & 2011 Price Collation map
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Editor: Candy From: 168Tex.com
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