FocusAsia MEG to rise despite new capacities

09 July 2007 04:08  [Source: ICIS news]

By Salmon Aidan Lee

SINGAPORE (ICIS news)--Asia monoethylene glycol (MEG) prices may not pull back in August as earlier expected, and the market could remain tightly supplied to as late as mid-2008 due to turnarounds, buyers and sellers warned on Monday.

Prices were expected to retreat next month due to the startup of Nan Ya Plastics’ new 700,000 tonne/year plant in Taiwan and aggressive pre-marking activities by producers with new capacities coming in 2008.

“Previously, we thought the Nan Ya plant would affect the supply situation so much, prices can fall after that,” said a private Taiwanese trader who is also an agent for Nan Ya.

“But that is not to be so, it seems, as Nan Ya is going for turnarounds this months and in September,” he added.

The trader was referring to the July and September shutdowns of two of Nan Ya’s existing lines. The company’s third line, a joint venture with China Man-made Fiber Co, could also undergo a turnaround soon.

“Whatever new volumes the new line puts into the market, the turnarounds will effectively take a huge portion away,” said an official from Japanese producer Mitsubishi Chemical.

“So the net effect would be the market remains tightly-supplied,” he said.

The supply tightness was also partly due to the reduced shipment of MEG from deep-sea sources, especially the US Gulf, over the past few months, said traders from two companies specialising with deep-sea MEG into Asia.

“I estimate that there could be no more than a few thousands [tonnes] coming in August [from the US Gulf],” said one of the two traders, who added that many reasons contributed to the supply cut, including “vessel space shortage, reduced production [in the US] and high prices of other ethylene oxide derivatives”.

On the demand side, two new polycondensation lines were also starting up in China in August, so demand would still outstrip supply, said market observers.

The market’s tightness was underscored by some leading producers’ attempt to have swap business with Nan Ya, after the Taiwanese producer successfully started up its new plant.

A Nan Ya official declined to give details over the requests, but confirmed that there had been such requests and the “volumes they asked for came up to be at least 20,000-30,000 tonnes for the next two months.”

He refused to say whether Nan Ya had acceded to the requests or not.

A series of shutdowns in Canada and the Middle East had also contributed to this supply tightness, said an official with MEGlobal.

The delay in the startup of new plants in Iran was another factor, added an official from Reliance Industries, an Indian producer.

Farsa Chemical’s new 400,000 tonne/year plant at Assaluyeh in Iran was supposed to startup in July but so far, there had been no news.

Marun Petrochemical, an affiliate of Iran’s National Petrochemical Co, started up its new plant earlier last year but had been running it at around 50% of nameplate capacity since due to feedstock issues, with intermittent shutdowns every now and then.

“All these new plants, which we thought should have dragged prices down, did not really happen,” said the Mitsubishi Chemical official.

According to engineering companies constructing the many new plants in the Middle East, some of the plants would be according to schedule, while others may not. A construction delay in the adjoining crackers, or other feedstock issues, could further affect the MEG projects’ startup.

Middle Eastern lines slated for startup in 2008 were three in Saudi Arabia and one in Kuwait.

But officials from SABIC (two lines in Saudi Arabia), PetroRabigh (one line in Saudi Arabia) and Equate (one line in Kuwait), respectively the operators of the new units, had not given any new startup dates other than those announced earlier.

“If that’s the case, then we may see much better prospects between now and next year,” said a Chinese trader based in Shanghai, who operates a four-man outfit and noted that there had not been any pre-marketing activities by the producers with new capacities in 2008.

“Fears that the MEG market might see overcapacity and thus see tumbling prices could be put to rest, at least for now,” added the trader.

By: Salmon Aidan Lee
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