MEG (UPSTREAM)

The ACP for March came out to $1350 for Shell (up $120/ton), $1380 for MEGlobal (up $160) and $1400 from SABIC (up $ 170).  Due to moderate downstream demand such a price hike is difficult to absorb, as demand for antifreeze is low.  In Europe, two opposing factors are working.  Shutdowns at Ineos, turnaround at Clariant and a shutdown at a small facility at BASF has reduced output, thus restricting supply, at the same time the market demand has withered due to low PET manufacturing output, due to shortage of PTA, and demand further impacted as antifreeze consumption, due to seasonality issue, is impaired.  However, this slackness can be followed by market tightness as numerous turnarounds are expected in the Saudi Arabian market, with the longer outages coming from April to June.  Also EO remains very balanced, with no excess of this feedstock in the market.  So from a supply chain perspective, things could tighten in the impending future. 

Capacity utilization in India has increased to 90% for PSF and PFY, which is an indication that prices are being translated downwards.  Further the demand for polyester in non-apparel sector, home furnishing and technical textiles is increasing and it is expected that the polyester sector would grow 10-15% when the GDP is expected to grow by 8.8% for the current fiscal year.  Similarly in the North East Asian economies a greater % of spot is being factored into the contract pricing, which gives an indication of a lively demand.  The operating rates in China are similar to those as the pre-lunar year time as there is reasonable downstream demand.  There is a general notion that MEG may remain short, given that polyester is set to grow at a pace higher than MEG expansions.  Similarly, with 42% of consumption of Chinese monoethylene glycol (MEG), being exported out of Saudi Arabia, which is expecting 9 shutdowns out of their 11 facilities, price hike in the domestic Chinese market seems inevitable in Q2.