Q3 MEG Market Review and Q4 Forecast
2021 witnessed remarkable changes in the PET industrial chain. Rising feedstock prices pushed up MEG prices, and the supply increment was less than expected. However, the price growth of MEG was much smaller than that of feedstock, so the gross profit from producing MEG shrank heavily. In Q3, 2021, the average market price of MEG rose by 45.33% Y-O-Y and up 7.72% Q-O-Q.
As showed in the above chart, the price growth of MEG was obviously smaller than that of feedstock but larger than that of downstream PET products. The price trend of China-origin MEG resources was basically in accordance with that of imported resources. As for feedstock, the prices of both crude oil and coal went up, but the price rise of coal was larger. Higher feedstock prices led to higher production cost. As for downstream products, the prices of PFY, PSF, chip-grade PET and bottle-grade PET all saw notable increases, which lifted the industrial profits and then supported MEG demand to some extent.
1. High feedstock prices provided cost support.
From Q2, 2020, the production cost of coal-based MEG kept increasing in line with advancing feedstock prices. In Q3, 2021, with the acceleration of coal price growth, the production cost of coal-based MEG also reached a relatively historic high level. However, the price growth of MEG was limited, so the gross profit of coal-based MEG was only around RMB 108/mt. Meanwhile, higher coal prices also pushed up methanol prices, and the production cost of MEG produced by the MTO method climbed to RMB 6,846.5/mt. Consequently, its gross profit fell heavily from Q1, so MEG producers were not willing to sell at low prices.
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