05 April 2013 09:36 [Source: ICB]
Prices are expected to rebound after unexpected weakness in the second half of February, says MEGlobal CEO
With demand anchored on China, which accounts for about half of 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.
MEGlobal president says US may see a 2% growth in MEG demand
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 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).
Notwithstanding the deceleration in China's GDP growth, it 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.
MEGlobal looks at EO/EG expansion
MEGlobal is looking at an opportunity to build a new integrated ethylene oxide/ethylene glycol (EO/EG) facility in the US, a company executive said on 25 March on the sidelines of the International Petrochemical Conference (IPC).
"Following Dow's announcement about building a new ethane cracker in Freeport, Texas, MEGlobal is seeking board approval to build an EO/EG facility," said Frank Hanraets, executive vice president, commercial and supply chain, MEGlobal.
Dow is building a 1.5m tonne/year cracker in Freeport, scheduled for start-up in 2017, as part of a massive petrochemical expansion programme on the US Gulf coast.
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