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Updated to Q1 2021
Supply in Asia was shortened due to heavy turnarounds in the Middle East and disrupted supply from the US. Hence, imports to China were reduced significantly. However, China’s exports jumped sharply amid an open arbitrage window between Asia and Europe.
Demand improved on pre- and post-holiday restocking activities. Downstream converters resumed operations faster than expected after the week-long Lunar New Year holiday.
Supply remained tight at the start of the year and MEG prices soared after US storm-related production outages created additional fears over import supply shortages. Importers looked to Asia to source material but concerns only really eased when demand issues downstream led to lower volume requirements from the polyethylene terephthalate (PET) sector.
MEG demand was higher, especially after supply security concerns caused by US Gulf coast production disruptions. Demand lessened in March as the anti-freeze and coolant sector entered a seasonal lull towards the end of the first quarter. Additive problems and automotive shutdowns caused by a lack of semiconductor parts also had an impact. Demand also decreased because of production issues in the polyethylene terephthalate (PET) value chain. DEG demand eased as supply improved.
The mid-February polar storm knocked out more than half of US EO capacity. By the end of Q1, force majeure declarations remained in place, most plants were still running at reduced rates due to limited supply of feedstock ethylene, and one plant remained offline as a result of the winter storm.
Because many downstream operations – such as ethylene glycols, glycol ethers and polyols – were also idled by the storm, demand for EO decreased.
Updated to Q2 2021
Supply is expected to increase due to the start-up of plants in China. Lianyungang Petrochemical plans to start up its 1.8m tonne/year MEG project in mid-April. China’s Zhejiang Petrochemical may also start up its 800,000 tonne/year new unit in Q2. Availability from the Middle East will also rise as heavy turnarounds there were completed in Q1.
Demand in Q2 may improve further with more vaccinations to be rolled out globally. The positive economic outlook may drive the demand for textile products accordingly. Polyester plants may continue to run at higher rates amid healthy margins.
Second quarter supply expectations are uncertain. MEG supply is more relaxed than anticipated due to the reduced PET demand situation. Nevertheless, planned turnarounds for ethylene oxide (EO) and EG are due to take place in the second quarter. MEG imports from the US could still be limited outside contractual requirements, following the storm in the US and subsequent production disruption. There is still uncertainty surrounding the ongoing anti-dumping investigation against US and Saudi Arabia imports.
European demand in the anti-freeze and coolant sector typically slows during the warmer months. MEG sellers are pinning hopes of improved second quarter demand from the downstream PET market, once the production issues are resolved in the chain. European lockdowns are set to ease during summer which could bring increased bottling consumption if larger events start to take place.
EO supply is expected to rebound in Q2, amid the final plant restarts and recovering feedstock ethylene supply that likely will increase EO and derivative run rates.
As downstream operating rates increase amid improving availability of raw materials, so too will demand for EO. Amid historically high ethylene prices, EO supply could be directed toward more profitable derivatives such as ethanolamines to maintain margins.
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* Due to active EG trading in Asia, daily reports are available for our Asian coverage.
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PET, polyester filament yarn