After-Holiday MEG Market Trend Analysis and 2022 Forecast
After the Spring Festival holiday, the prices of spot MEG in Zhangjiagang first rose from RMB 5,350/mt on January 30 to RMB 5,510/mt on February 7 and then fluctuated downwards to RMB 4,925/mt on February 17. What are the reasons behind the fluctuations, and how the market will go in 2022?
The MEG market made a good beginning after the holiday.
During the Spring Festival holiday, WTI prices broke through $90/bbl for the first time since 2014 and once climbed to $93.17/bbl. On February 7, WTI prices closed at $91.32/bbl, up 5.18% from January 28. Rising crude oil prices boosted market sentiments, and the mainstream negotiation prices of MEG also went up. Up to February 7, the prices of spot MEG in Zhangjiagang advanced to RMB 5,510/mt, up 2.99% from January 30.
Cost and demand support weakened, dragging down MEG prices.
Crude oil prices kept fluctuating from February 8, and the loose cost depressed market sentiments. Meanwhile, MEG supply increased, while its demand growth was limited due to the insipid sales at downstream PET plants. Consequently, MEG spot prices fell back amid multiple bearish factors.
In mid-February, crude oil prices fell back, weakening the cost support to MEG. The production switch at some MEG units led to a decline in MEG supply, boosting market sentiments to some extent. However, downstream demand was soft, and the MEG inventory was still expected to build up. In such a climate, the mainstream negotiation prices of spot MEG dropped. Up to February 17, the weekly average price of spot MEG closed at RMB 4,925/mt in East China, down 10.62% from February 7.
Fluctuating downwards may be the keynote of the MEG market in 2022.
In 2022, the major price driver of MEG is predicted to return to the supply-demand fundamentals from the cost factor which was decisive in H2, 2021. As for the macro-environment, in the face of high inflation, the Federal Reserve is about to raise interest rates, and the shift in the U.S. monetary policy is heating up. The pressure on the elasticity of consumer demand caused by this has become a foregone conclusion. As for crude oil prices, the current oil prices are still high, but the geopolitical risk premium may gradually fade, and Iran's oil supply is very likely to increase significantly under the U.S.-Iran negotiations. Therefore, crude oil prices may enter a stage of adjustment. As for the market fundamentals, there is 8,250kt/a of newly added MEG capacity in 2022, and the expected supply increase will impact the supply-demand structure. In addition, the public health event, inflation and other factors may exert some negative influences on the development of the downstream PET industry, so the demand growth of MEG may slow down, which can hardly support the MEG price to go up.
All information provided by SCI is for reference only,which shall not be reproduced without permission.
Please click "Read more" for the full article.
