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Monday, October 18, 2021

Asian monoethylene glycol margin rises to highest level since mid-Aug on bearish ethylene

Asia’s monoethylene glycol margin had risen to its highest level in more than a month last week, in line with a fast-falling ethylene market, S&P Global Platts data showed.

The MEG margin had narrowed to minus $181/mt Thursday, from minus $225/mt the previous day — its highest since August 11 this year when it was calculated at minus $173/mt.

On Friday, the Asian MEG margin weakened slightly to minus $185/mt, and was hovering at minus $185/mt as of early Monday.

The CFR China MEG price benchmark had risen $9/mt week on week to be assessed at $625/mt last Friday, while CFR Northeast Asia ethylene dived $65/mt to $1,100/mt during the same period.

The Asian MEG market was seen as relatively stable even as MEG inventories fell in China.

According to market sources, stock levels in East China declined 15,000 mt week on week to 632,000 mt last Friday.

On the other hand, Asia’s ethylene market fell sharply last week, pressured by fast-diminishing demand in China and offsetting the impact from Shell Chemicals’ unplanned shutdown of its steam cracker at Pulau Bukom in Singapore.

Some spot deals were reported to have been concluded at below $1,100/mt CFR Northeast Asia last week, down from buying indications of $1,100/mt CFR two weeks ago.

Shell shut its steam cracker at Pulau Bukom last Tuesday following a compressor issue.

The company issued a force majeure on ethylene from the 960,000 mt/year steam cracker Thursday following the shutdown, Platts reported last week. Sources close to the company said that the company’s 750,000 mt/year MEG plant is running at around 60% capacity following the emergency shutdown of the steam cracker.

But sources added the run cut had limited impact on Asia’s MEG market, as Shell was seen to have sufficient MEG inventories to supply to their customers.

The Asian MEG margin is calculated by the following formula: the CFR Northeast Asia ethylene price multiplied by 0.6 conversion factor plus $150/mt production cost.

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