InterviewGPCA ’09: Global MEG demand seen to grow at 6.5% in 2010

11 December 2009 05:33  [Source: ICIS news]

By Prema Viswanathan

DUBAI (ICIS news)--Global demand for monoethylene glycol (MEG) is likely to grow by as much as 6.5% in 2010 from 2009, led by robust domestic demand in China, a senior industry official said late on Thursday.

“In China, the demand for domestic garments has been good in recent months and this has offset the decline in export demand caused by the global financial crisis,” said Frank Hanraets, vice president, commercial, with MEGlobal, a leading MEG producer in the world.

However, if the US and Europe continue to buy less, it could result in a decline in demand for exports from China, Hanraets told ICIS news on the sidelines of the Gulf Petrochemicals and Chemicals Association (GPCA) forum.

“But what you also need to consider is, with the surge in domestic demand in China, you are seeing a shift from very expensive to less expensive garments, and actually there is less polyester going into expensive garments than into cheaper garments. So it’s a complex situation,” he added.

The total global demand of MEG, a commonly used intermediate in the production of polyester fibres, is estimated at 18.5m tonnes in 2009.

Hanraets said he was bullish on the growth prospects of China and Asia.

“To me it seems China has embarked on a path of no return. China will not go back to where it came from, the government is determined to spread growth and the trend is unstoppable,” said Hanraets, adding the situation in the rest of Asia was equally bullish. “With strong GDP growth projections, the outlook looks good.”

To him India was another strong market, with a high potential for demand growth.

“The Indian MEG market is barely 1.5m tonnes/year while the Chinese market is 7m tonnes/year, whereas the populations of both countries are more or less the same. So the Indian market has scope to grow much more,” Hanraets added.

While the demand side looks promising, there are worries about the huge volumes of new supply emerging from two new plants in Saudi Arabia (PetroRabigh and Sharq) and the Shell Chemicals plant in Singapore.

“However, we are also seeing a wave of consolidations, which could help to balance supply,” he said.

While the earlier consolidations had been in the West, Hanraets said he believed the next round of plant closures could be in Asia. “Older Asian plants reliant on expensive naphtha may be forced to shut down [in the coming years].”

The bogey of protectionism, which had been a hot topic for discussion at the GPCA forum, was unlikely to trouble the MEG industry, he said.

“Asia is very short of MEG, they need MEG from the Middle East. I think they will be shooting themselves in the foot if they put up trade barriers. They have a strong textile industry and cannot live without importing MEG.”

Turkey has initiated a dumping probe into glycol imports from Kuwait, Saudi Arabia and Bulgaria. “But I personally hope they will be realistic and not impose any duties,” he said.

The GPCA forum ended on Thursday.

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By: Prema Viswanathan
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