MEGlobal eyes North American expansion

30 November 2012 18:51  [Source: ICB]

President Ramachandran outlines Canada expansion in Q2 2013 and scopes out locations for a new grassroots plant


New reactors will be installed at the Fort Saskatchewan MEG unit


Dubai-based MEGlobal is undertaking major expansions in monoethylene glycol (MEG) in North America. It expects to begin operations at its newly-expanded MEG unit at Fort Saskatchewan in Canada by April-May 2013, and is planning to build a new grassroots facility in North America.

The company expects the reactors it bought as part of a project to improve the conversion efficiency at the unit to arrive in Canada around February next year, said Ramesh Ramachandran, president of MEGlobal, who spoke with ICIS on the sidelines of the 7th Gulf Petrochemicals and Chemicals Association (GPCA) forum in Dubai.

MEGlobal is a joint venture between US-based Dow Chemical and Petrochemical Industries Co (PIC) of Kuwait and was set up in 2004.

The firm has two plants at Prentiss, Canada, with nameplate capacities of 320,000 tonnes/year and 278,000 tonnes/year respectively. A third plant at Fort Saskatchewan has a capacity of 380,000 tonne/year of MEG.

Ramachandran declined to comment on the size of the expanded production capacity at the Fort Saskatchewan plant once the new reactors are installed but said that "it will be a significant improvement".

"We will be making more glycol instead of carbon dioxide so that's the best way to put it. With the same amount of ethylene we can make more glycol," he said.

The company is now looking to build a new grassroots MEG facility in North America, he said, adding that plans for the project are likely to be confirmed by the end of 2013.

"We have our options reasonably well-scoped and we should be going to the board and hopefully firm it up next year," Ramachandran said.

Meanwhile, the company has no plans for a major turnaround at its units in Canada next year apart from one to install the new reactors at the Fort Saskatchewan unit early in the year, he said.

The company previously shut its three plants in May-June this year for maintenance. The units were restarted and began full operations by the end of June, Ramachandran added.

Looking ahead, Ramachandran said that global demand growth rate for MEG is likely to remain at similar levels to 2011 at around 5-6%, with China continuing to drive the global MEG market, accounting for close to 50% of overall demand.

There is not enough MEG globally to meet the demand from China because is a "tremendous amount" of polycondensation capacities that are coming on stream, he added. "Overall glycol demand has been good but it has not been as good compared with the past few years. Polyester demand has definitely slowed down in 2012 compared to the previous years, while PET [polyethylene terephthlate] demand has been reasonable this year," he said.

"Ethylene glycol markets are going to be tight in the next 3-5 years before the next wave of capacity comes on stream."

"But our biggest worry is that our downstream customers are definitely in very difficult markets with tremendous excess capacity. MEG demand is growing and markets are going to be tight but we would not want to be in a business where our customers are not making a profit," he added.

Asia's spot monoethylene glycol (MEG) prices rebounded in the week ended 23 November, but the extent of price increases was limited. The rebound was mainly driven by firmer crude oil prices and a 13-month high HSBC's November flash Purchasing Managers' Index (PMI) for China, which is a sign of increasing manufacturing activity in the country.

However, potential price upside has been curtailed by traders' cautious buying sentiment in view of abundant supply and persistently weak demand from the end-users. With an overall lower operating rate at downstream polyester units in China, the end-users are mostly covered comfortably by term supplies. Meanwhile, China's MEG port inventories rose by 40,000 tonnes from the previous week to 730,000 tonnes.

Additional reporting by Becky Zhang in Singapore

By: Nurluqman Suratman

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