Chemical Profile Diethylene Glycol (DEG)

08 November 2004 00:01  [Source: ICB Americas]

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DIETHYLENE GLYCOL

November 8, 2004

PRODUCER	CAPACITY*
Dow Chemical, Plaquemine, La.	45
Dow Chemical, Seadrift, Tex.	60
Dow Chemical, Taft, La.	150
Eastman Chemical, Longview, Tex.	25
Equistar Chemicals, Bayport, Tex.	60
Formosa Plastics, Point Comfort, Tex.	65
Huntsman, Port Neches, Tex.	50
Old World Industries, Clear Lake, Tex.	70
PD Glycol, Beaumont, Tex.	85
Shell, Geismar, La.	110
Total	720

*Millions of pounds per year of diethylene glycol (DEG), derived as a co-product with ethylene glycol and triethylene glycol by the hydration of ethylene oxide. The industry generally operates to maximize ethylene glycol production. Nameplate DEG capacities are based on total capacity for ethylene glycols.  Dow Chemical Company and Petrochemical Industries Company (PIC) of Kuwait, a wholly owned subsidiary of Kuwait Petroleum Corp., formed a 50-50 joint venture this year for the manufacture and marketing of merchant monoethylene glycol and DEG. The new venture is named MEGlobal. To form MEGlobal, Dow will sell to PIC a 50 percent interest in its Canadian ethylene glycol assets. Dow owns 100 percent of a plant in Fort Saskatchewan, Alberta, as well as 100 percent of Unit I at Prentiss, Alberta, and 75 percent of Unit II at Prentiss. Far Eastern Textiles Ltd. owns the remaining 25 percent of Unit II at Prentiss. MEGlobal will produce roughly 1 million metric tons of ethylene glycols at its Canadian facilities with ethylene purchased from Dow Canada. MEGlobal will also market the excess ethylene glycols produced in Dow's plants in the U.S. and Europe, and may also market the glycols produced by Dow and PIC affiliates.  In September 2002, BASF idled its 890 million pound-per-year ethylene glycol plant, with its attendant 55 million pound DEG unit, at Geismar, La., as a result of the company's exiting the domestic ethylene glycol market. To fulfill its glycols commitments, BASF entered a tolling arrangement with Dow to supply its glycols customers. Concurrently, the company closed its two older ethylene oxide units at the site, eliminating 595 million pounds of capacity. BASF still maintains its 484 million pound capacity ethylene oxide unit, which commenced operating in 2001, and is concentrating on the purified ethylene oxide business.  Old World Industries purchased Celanese Corp.'s ethylene oxide/glycol business in 1999. Celanese continues to operate the facilities in Clear Lake, Tex., for Old World Industries. PD Glycol is a 50-50 joint venture between DuPont and Equistar. Profile last published 9/10/01; this revision 11/8/04.

GROWTH

Historical (1998-2003): -1.5 percent per year; Future: 1.8 percent per year through 2007.

PRICE

Historical (1998-2003): High, 31c. per pound, aver. annual contract, Gulf, tanks, f.o.b.; low, 18c. per pound, same basis. Current: 51c. to 53c. per pound, same basis.

DEMAND

2002: 734 million pounds; 2003: 746 million pounds; 2004: 800 million pounds, projected. Demand equals production plus imports (2002: 314 million pounds; 2003: 302 million pounds) less exports (2002: 52 million pounds; 2003: 79 million pounds).

USES

Polyurethane, 22.7 percent; unsaturated polyester resins, 20.2 percent; triethylene glycol and tetraethylene glycol, 10.0 percent; antifreeze blending, 8.5 percent; solvents, 8.0 percent; morpholine, 7.0 percent; natural gas dehydration, 4.0 percent; textiles, 3.1 percent; 1,4-dioxane, 1.5 percent; miscellaneous, 15.0 percent.

 

 

STRENGTH

The largest application for DEG is as an intermediate in the production of unsaturated polyester resins (UPRs) and polyurethanes. Together, these sectors account for nearly 45 percent of DEG demand. In UPRs, DEG is an important glycol reactant, second only to propylene glycol in its usage. In polyurethanes, it is used as an alcohol component in polyester polyols and as a chain extender and cross-linker in the polymerization reaction. Both sectors, however, are sensitive to economic conditions and declined in 2001-2002. With the strong economy this year, both areas are doing well. In the last two years, the global supply of DEG actually contracted as BASF and Huntsman took plants off line, but demand for DEG has soared. In addition, very little new capacity has been added. Last year, only Nan Ya in Taiwan, which brought on a new 70 million pound DEG unit, concurrent with a new 700 million pound ethylene glycol facility, added new capacity. There is essentially no new capacity scheduled for 2004. As a result, prices have doubled in the past year in the U.S.

WEAKNESS

Higher feedstock costs have squeezed margins. This year, U.S. ethylene production costs have risen 3.5c. per pound on account of higher energy costs. Not only does this cause DEG prices to rise in the short term, but long-term prospects for DEG exports look uncertain with overseas capacity being built in the Middle East ethylene can be sourced more cheaply because of lower-cost natural gas.

OUTLOOK

The market for DEG has become considerably tighter this year, following the lead of ethylene glycol. This firm demand and tight supply has driven up DEG prices to where they are equal to, or slightly higher than, ethylene glycol prices—a reversed pricing relationship. While domestic growth, exports and escalating energy costs are pushing DEG prices higher, the fundamental problem facing the DEG market is a lack of new capacity. For the past two years, there has been little new DEG capacity added despite escalating demand. However, starting in the fourth quarter of this year, the global market will see significant new capacity come on stream, mostly from the Middle East. Over the forecast period, EG demand growth in the U.S. is expected to rise by 3.5 percent annually.

By: Mark Kirschner
+1 713 525 2653

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