Chemical profile: US ethylene glycol

08 March 2013 09:17  [Source: ICB]

USES
Ethylene glycol (EG) is mainly used in the production of polyester - in fibres, resins and films - which accounts for roughly 82% of global EG consumption.

Polyester fibres is the main consumer, followed by use in polyethylene terephthalate (PET) resin, the second largest outlet. The next major outlet is in automotive antifreeze. Additional EG applications include de-icing fluids and surface coatings.

SUPPLY/DEMAND
Global demand for EG has followed a positive trajectory over the last few years. Rising world demand for polyester has precipitated a strong increase in demand for EG.

In 2010, global demand increased by more than 12% to almost 20m tonnes, and it is forecast to grow about 5.4%/year to 2015, driven by increased demand for PET and polyester fibre in China and other emerging markets.

Global operating rates average about 77% and are expected to rise into the 80% range by early 2013, fuelled by robust demand growth and undercapacity.

In the US, supply during the first quarter of 2013 is tight, brought on by a heavy plant maintenance schedule, including Huntsman's 255,000 tonne/year Port Neches plant in Texas, which was down in January for a reported 60-day period. The company has confirmed that the plant went down in January for this purpose, but did not confirm the length of the shutdown.

In addition, LyondellBasell's 265,000 tonne/year plant in Bayport, Texas, was said to be down for 30 days maintenance in January. This had not been confirmed by the company at the time of writing.

Other plants scheduled for maintenance in the quarter include Indorama's 358,000 tonne/year Clear Lake facility in Texas and Shell's 400,000 tonne/year plant in Geismar, Louisiana. Both are said to be scheduled for maintenance in March. Neither company has confirmed the details.

Demand has been low during the winter months as a result of slow downstream demand in the PET bottle resin market, which is typical for the season.

PRICES
February contract prices are at 62-65 cents/lb ($1,367-1,433/tonne, €1,053-1,103/tonne) FOB (free on board) industrial-grade EG (EGI); 62-65 cents/lb FOB diethylene glycol (DEG) and $1.09-1.13/lb FOB triethylene glycol (TEG), as assessed by ICIS.

Meanwhile, spot prices for antifreeze-grade EG (EGAF) are at 54-55 cents/lb FOB barges.

EG contracts are expected to rise by about 1 cent/lb ($22/tonne) in February because of the tight market resulting from a heavy maintenance schedule during this first quarter, sources said in the week ended 1 March.

Despite recent falling spot prices in the Asian monoethylene glycol (MEG) market, the US EG market held steady and a buyer said a 1 cent/lb increase in contract values for EGI and DEG has a chance of succeeding.

Meanwhile, market players in the US are watching the price trends in the MEG Asia Contract Price (ACP).

Major MEG producers rolled over their March MEG ACP nominations from February, so the nominations remain at $1,300-1,310/tonne CFR Asia.

Downstream prices for US PET were higher by 3 cents/lb for February material on the back of higher upstream paraxylene (PX) costs.

TECHNOLOGY
Commercial production of EG is by the oxidation of ethylene in the presence of oxygen (or air) and a silver oxide catalyst to produce ethylene oxide (EO), the feedstock for EG. A crude ethylene glycol mixture is then produced by the hydrolysis of EO with water under pressure.

A typical production mix is 90% EG, 9% DEG and 1% TEG. Fractional distillation under vacuum is used to separate the monoethylene glycol from the higher glycols.

OUTLOOK
The US EG market has been on an uptrend amid snug supply and price increase nominations over the past few months.

There is talk that producers have bought up spot barges to fulfil contractual obligations and build inventory ahead of pending shutdowns planned in the first quarter of 2013. Some market players have said the EGAF spot market is tighter than most people realise and that there is not much product for sale at this point.

However, truck and rail EGAF buyers do not see the market as short and demand appears slow.

Prices are expected to remain largely steady through the first quarter, as demand in the downstream polyester fibre, PET resin and antifreeze/coolant sectors is likely to continue to be muted.

Meanwhile, INEOS is considering adding an EO plant of at least 500,000 tonnes/year on the US Gulf Coast, and will be including downstream EG and derivative units that could absorb the new unit's production, the company said in March 2011.

In the upstream picture, the ethylene February contract was fully settled at a rollover, which will influence downstream pricing trends for EO and EG.

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By: Feliza Mirasol
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