INSIGHT: US EG market faces tightening supply, price hikes

18 December 2012 16:18  [Source: ICIS news]

By Leela Landress

MEDELLIN, Colombia (ICIS)--The US ethylene glycol (EG) market will contend with several challenges in the coming months, from a heavy maintenance schedule planned for the spring to possible price increases through the first half of 2013.

Many in the business foresee supply constraints and rising prices.

“We expect EG in the US to be soft in December, but expect a limited price drop, since January and the first quarter [of 2012], will be tight due to turnarounds and catalyst changes,” a large trader said.

EG contract pricing is projected to decrease in December - at least one producer has issued a price decrease nomination - and to rise in January because the supply chain is expected to tighten.

“We see December as a potential market bottom as spot prices are moving up again in Asia,” a large producer said. “With turnarounds in the first half of 2013, the Americas will be supply limited, which will most likely [lead to] firm prices even with flat demand.”

Numerous scheduled turnarounds and maintenance are expected during the first half of 2013 on the US Gulf (USG), taking 65% of the almost 1.97m tonnes/year of capacity there offline.

Ethylene oxide (EO) and EG production at Huntsman’s Port Neches plant in Texas is expected to be curtailed by maintenance in January, a source familiar with operations said. The length of the maintenance is unknown, but players in the market project a duration of 60 days.

Huntsman has not confirmed the planned maintenance, or the duration of the work. Its Port Neches plant has a capacity of 255,000 tonnes/year, according to ICIS data.

Additionally, Equistar, a subsidiary of LyondellBasell, is said to be planning maintenance for the month of January. This is unconfirmed by LyondellBasell.

Lyondell’s Bayport plant in Texas has a capacity of 265,000 tonnes/year.

Shell is planning 10 days of maintenance at its Geismar plant in Louisiana in March, buyers and sellers in the market said. This is unconfirmed by Shell. The Geismar plant has a capacity of 400,000 tonnes/year.

Indorama Ventures is planning an approximate 30-day turnaround and catalyst change projected to start in mid-April and to run through mid-May, although a spokesman for the company could not be reached for comment. Indorama’s Bayport, Texas plant has a capacity of 358,000 tonnes/year.

Despite projected snug supply for the next few months, there is sentiment that the situation will ease going into the second half of 2013.

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 Saskatchewan unit to arrive in Canada around February next year, said MEGlobal president Ramesh Ramachandran on the sidelines of the 7th Gulf Petrochemicals and Chemicals Association (GPCA) forum in Dubai at the end of November.

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.

Demand for MEG globally this year is expected to grow at about 5-6% but the industry will be off to a slow start in 2013, Ramachandran said.

“Once we get past the early Chinese New Year [celebrations] we think demand will start picking up again at a very brisk pace,” he added.

Major EG producers in the US include LyondellBasell, Huntsman, MEGlobal, Indorama, SABIC and Shell.

By: Leela Landress
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