Asian monoethylene glycol margins hit a six-month low of minus $183/mt Tuesday as MEG prices tumbled amid ample supply in China and a rise in feedstock ethylene costs.
The margin was last at minus $183/mt on October 5 last year and has remained in negative territory since February 14, S&P Global Platts data showed.
MEG plummeted $48/mt week on week to be assessed at $687/mt CFR China Tuesday, while feedstock ethylene rose $30/mt over the same period to $1,200/mt CFR Northeast Asia, according to Platts data.
The MEG production margin is calculated as the CFR China MEG price minus production costs. The production cost is calculated by multiplying the CFR Northeast Asia ethylene price by a conversion factor of 0.6 and adding $150/mt for production.
The sudden fall in MEG prices since late last week has caught market participants by surprise, as downstream polyester demand is generally seen as healthy and its high demand season typically runs from April to June.
One factor that could explain the downtrend in MEG prices is 610,000 mt of inventory at Chinese ports -- a level considered very high -- with another 160,000 mt estimated to be en route to ports in east China this week.
Traders said panic selling on the futures market on expectations of further price falls had exacerbated the decline in MEG prices, and market sentiment was likely to remain bearish throughout the second quarter.
