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MEG prices in China may continue falling

November 15/2011

(ICIS) -- Monoethylene glycol (MEG) prices in China may continue falling, after declining by about 20% over the past two months because of weakening demand from the downstream polyester sector, industry sources said on Tuesday.

Spot domestic prices declined to yuan (CNY) 8,350/tonne ($1,315/tonne) on 14 November from CNY10,400/tonne in mid-September, according to Chemease, an ICIS service in China. The price represents a rebound from last Fridays assessed price of CNY8,200/tonne, which is the lowest recorded this year according to ICIS pricing data, but downward pressure remains.

MEG is primarily used in textile production. Textile factories in China secured fewer orders from abroad because of the poor global economic environment, with the eurozone entangled in a debt crisis and the US - the worlds biggest economy - still in a fragile state.

Textile makers are currently not building up their polyester inventory and are instead procuring cargoes on a need-to basis, market sources said.

Demand for MEG from downstream polyester producers usually peaks in September and October the busy production months for the textile industry heading towards the year-end holidays. Chinas polyester producers had a sales-to-output ratio of 50-60% in early November, down from 80-90% in October, according to data from Chemease.

Perspectives of development of polymer markets, pricing issues and other important aspects will be discussed at The Polymers Summit-2011, which will be held in Moscow on November 30, 2011 at the Ritz Carlton Hotel. The Summit will be organized by MRC with the support of ICIS. The main idea of the Summit is to find a "the golden mean" between producers and converters. When producers receive exactly such margin of production, which helps them to invest in production expansion in order to substitute polymers imports, and the converters receive such price of feedstock that helps them to compete imported finished products. The Summit site gives an access to the live video of the Summit, speakers" presentations, as well as opportunities to ask questions or make appointments to any Summit partcipant.

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