25 March 2013 23:17 [Source: ICIS news]
By Pearl Bantillo
SAN ANTONIO, Texas (ICIS)--With demand anchored on China, which accounts for about half of the total global monethylene glycol (MEG) consumption, MEGlobal executive vice president Frank Hanraets said there is a strong chance that the market will enjoy “another good year” in 2013.
In an interview on Monday on the sidelines of the International Petrochemical Conference (IPC), Hanraets said that China’s stronger economic growth, compared with the rest of the world, will buoy up global MEG consumption, which is expected to grow at around 8% this year from about 23m tonnes in 2012.
China is the world’s second biggest economy and is a key importer of petrochemicals in Asia. Its MEG consumption in 2012 is about half of the global total at 11m tonnes, of which 8m tonnes were imported and about 3m tonnes were procured from the domestic market, according to Hanraets.
Prices in Asia are likely to stage a rebound in April and May, when demand picks up after an unexpected weakness in the second half of February, when Chinese players returned to the market following a week-long holiday on 9-15 February, Hanraets said.
On 22 March, MEG prices in Asia were assessed at $1,019-1,036/tonne CFR (cost and freight) China, shedding $18/tonne (€14/tonne) over the previous two weeks. The last assessed prices were down by an average of 15% from the start of the year, according to ICIS.
“We had a very good start to the year, where prices actually were quite high, and again in the run-up to the Chinese New Year, people bought extra, and prices were firm,” Hanraets said.
Most market players across the petrochemical industry were expecting demand to pick up after the Lunar New Year holiday, which is observed in most parts of the northeast and southeast Asia. In the case of China, the country was out on holiday for a full week.
But trading activities failed to improve as initially expected, causing prices to remain weak.
The near-term volatility in prices, however, does not serve as an indication of an overall weak market this year.
“China [demand for MEG] is growing at about 8% per annum. They are at 11m tonnes now. China needs a lot of glycol,” Hanraets said, citing that market players may just be taking a pause and would have to “come back very soon”.
“We will see [demand] pick up again in April-May and then prices will follow,” the MEGlobal executive said.
MEGlobal is a Dubai-based joint venture between the US’ Dow Chemical and Kuwait’s Petrochemical Industries Co (PIC). It is a major MEG producer that exports to China.
The Chinese economy registered its slowest expansion in 13 years at 7.8% in 2012, down from a 9.2% growth in 2011. For 2013, its government has announced that a 7.5% target stays for the second year.
Growth in MEG demand in the country tends to be slightly above the GDP growth. Notwithstanding the deceleration, China’s growth continues to be strong relative to other markets.
The US, which consumes about 3m tonnes/year of MEG, may just see around a 2% growth this year, while Europe’s demand for the chemical may just be flat, Hanraets said.
“Half of the MEG demand is consumed in China, so whatever happens in China, you will see the rest of the world having a hard look on that,” he said.
Strong expansion in global capacity in downstream polyester and polyethylene terephthalate (PET) sectors augurs well for the MEG market, Hanraets said.
“The next three to five years will be very positive for glycol,” he said.
Currently, the supply-demand situation for the MEG market remains balanced as economic growth remains weak, but it could tighten if no additional capacity is built soon and the economies resume a good growth pace, Hanraets said.
Expecting good demand for MEG this year, the company will increase the capacity at one of its three Canadian plants following a month-long turnaround in May.
MEGlobal is also hoping to secure approval from its shareholders to build a world-scale facility with around 600,000 tonne/year of capacity at Freeport, Texas, where Dow Chemical is planning to build an ethane cracker, he said.
“If we build in the US, we plan to market the product in the Americas. This would then enable us to ship more ethylene glycol from our plants in Alberta, Canada to Asia,” Hanraets said.
($1 = €0.77)
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