Ethylene glycol

Major downward pressure was put on Asia’s monoethylene glycol (MEG) market by full tank spaces at Chinese main ports and a slow recovery of demand in the downstream polyester industry after the Lunar New Year holiday. However, potential price downsides are believed to be limited, because there remains strong buying interest from traders, who expect prices to increase in the longer term. They said market fundamentals could reverse when massive new polyester capacities come on line in China and India, against a backdrop of a sole MEG expansion in Asia this year. The volatile macroeconomic environment will keep causing uncertainty in the market. Hikes in crude futures and an easing of China’s monetary policy could encourage speculative trading, while slower global economic growth could restrict purchasing power from downstream polyester makers.

The European MEG market is firm because of low inventories and the region, a net importer, will receive no bulk shipments before mid-March. The firm trend will continue if upstream ethylene prices remain high and the peak season for downstream polyethylene terephthalate (PET) bottles kicks in during the warmer months. The dominant Asian market will also help to determine the direction of prices and availability in Europe.

US MEG values are expected to rise slightly during the first quarter to accommodate higher feedstock costs, and this is likely to steadily continue into the second quarter. Market players will continue to monitor the feedstock price outlook, as a busy turnaround season is scheduled for US crackers this spring. Demand is expected to remain subdued and slightly below last year’s levels.