MEG will not fall as expected, Tecnon OrbiChem

18 June 2007 17:14  [Source: ICIS news]

LONDON (ICIS news)--Global monoethylene glycol (MEG) prices are unlikely to fall as fast or as far as previously thought, Tecnon Orbichem said on Monday.

The consultants warned, however, that if there was no significant rationalisation of production in 2008 and if crude oil and naphtha prices remained at current levels, glycols prices would go down markedly by the end of that year.

Annual capacity growth of close to 9% was expected between 2006 and 2013 compared with demand growth of close to 5%, they added, but a soft landing was forecast as new projects were delayed.

High cost producers in Asia particularly may also be forced to shutdown, the consultants said in their latest analysis of supply/demand data for ethylene oxide and derivatives, including MEG.

MEG producers have been bracing themselves for a crash since early 2006 when the market expected start-ups of several large units in Asia and the Middle East. However, start-up delays and plant problems have become the norm. 

Yet Middle East and Chinese material would eventually find its way to the global marketplace and when it does, prices would reflect the impact of a huge supply of low-cost product, Tecnon OrbiChem warned

The consultants projected MEG capacity additions of 14m tonnes between 2006 and 2013.

The market will be protected from oversupply in 2007 by planned plant turnarounds, including 200,000 tonnes at SABIC plants in Saudi Arabia in the second and fourth quarters.

Most observers believe that prices will remain fairly robust during 2007, the consultants added.

By: Nigel Davis
+44 20 8652 3214

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