China MEG Prices on M-Shaped Trend in Q3
Preface: In Q3, 2023, China’s MEG market showed a notable M-shaped trend affected by macro drivers, and the spot market price hovered at RMB 4,100/mt. SCI reckons that MEG prices will possibly shrink in Q4. The influence of related policies and intensifying geopolitical conflict should be noticed.
In Q3, 2023, China’s MEG market showed a notable M-shaped trend. Market participants held positive attitudes toward economic and consumption recovery amid the implementation of loose policies, which was the main driver of the MEG price increase. In addition, MEG fundamentals improved backed by the high PET industrial operating rate. Entering July, MEG prices moved up continuously. The MEG spot price in East China rose to RMB 4,130/mt at the end of July from RMB 3,810/mt in end-June.
However, after that, MEG prices dropped to around RMB 3,930/mt in mid-August. Risk aversion sentiments warmed up rapidly because of a U.S. credit rating downgrade in early-August.
Entering September, more policies were implemented to boost the economy. At the same time, a couple of MEG units underwent maintenance, and some imported cargoes were polluted, dragging down the MEG supply. Moreover, increased international crude oil prices gave stronger cost support to the MEG market. In the middle of September, MEG prices rose to RMB 4,275/mt or so. However, MEG prices stopped rising and turned to dip in end-September with the National Day holiday. During the holiday, international crude oil prices saw a downward trend, giving thinner cost support to the MEG market. Thus, after the holiday, China’s MEG prices fluctuated downward, and the spot market hovered at RMB 4,000/mt.
Entering Q4, MEG prices will likely go down further. Though the PET industrial operating rate rebounds after the holiday, there are expectations for the demand drop as the PET industry operating rate may move down with the end of peak season. The drop in MEG inventory can hardly last. Thus, in Q4, MEG prices may fail to improve from the perspective of fundamentals. Q4 is expected to see the verification stage of policies implemented in Q3, weighing on the MEG market.
If economic data underperforms, more positive policies will possibly be implemented, which will likely benefit the market. At the same time, if the geopolitical conflict in the Middle East is further intensified, it may affect the global supply of crude oil, and then drive the price of crude oil and downstream chemicals. Therefore, the influence of related policies and intensifying geopolitical conflict should be noticed.
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