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Updated to Q4 2020
Supply in Q4 2020 remained limited amid several global plant maintenance. Due to poor margins, some MEG producers continued to cut operations or delayed plant restarts. Import discussions were buoyed by falling inventories and short supply. The arbitrage window between Asia and Europe remained open given the tight supply in Europe.
Downstream demand was healthy in October and slowed down towards the end of the year. Most polyester plants were running at higher rates due to lower feedstock cost, while downstream textile converters had high inventories amid the traditional off-peak season for the textile industry. In December, production at polyester plants and downstream converters slipped due to a power cut in east China caused by the shortage of coal.
European MEG supply was limited due to fewer imports and localised production constraints. EG spot supply from the US was tight after outages during hurricane season, limiting imports to Europe. The EU antidumping probe on material originating from Saudi Arabia and the US launched in October 2020 also hindering imports entering Europe. DEG was also short in December.
European MEG contractual demand increased in the face of rising spot prices and more limited material. Demand for Asian imports increased, to cover shortfalls caused by lack of availability from the US. Downstream PET demand levels were better than expected, due to container shortages hindering imports.
Supply began to recover in November from a severe shortage in September and October that disrupted downstream production, though MEG spot availability remained limited through the end of 2020. DEG is co-produced in far smaller volumes than MEG and as such remained scarce, with Europe demand in particular providing pressure.
Demand for MEG into PET continued to be healthy as downstream run rates ramped back up along with recovering MEG supply. The persistent coronavirus pandemic supported demand for single-use packaging, a primary use for PET resin. Demand for DEG remained unseasonably strong on mild winter weather that helped extend the construction season, as well as continuing strength in durable goods purchases using downstream polyurethane systems and unsaturated polyester resins.
Updated to Q1 2021
Supply may face a further decline amid the heavy plant turnarounds in Asia and the Middle East. The turnaround season in the US is also expected to see falling exports to Asia. There were no plans heard in Asia and the Middle East to increase production, given the weak margins. Port inventories in China may drop amid an anticipated fall in imports in Q4.
Downstream demand will slow down with the approach of the year-end lull season. Buying activities from converters may tilt slower amid the coronavirus-hit demand. Polyester producers may lower operations further on slowing sales and rising inventories.
The European MEG spot market is dry, with supply tightness expected to spill into the first couple of months of 2021. Reduced availability from the Middle East is expected to continue due to feedstock limitations. Local EO production issues continue to cause tightness in Europe.
The downstream PET outlook seems upbeat, as tourism and beverage sales could flourish once lockdowns ease. Container shortages are still set to impact PET imports. Antifreeze demand took a real hit during the first round of lockdowns in Europe, as automotive manufacturers were forced to close, so the outlook is uncertain.
Supply should recover in November, as plants restart from planned and unplanned shutdowns. If demand for high-purity EO derivatives such as cleaning and hygiene products continues, producers could divert the feedstock away from less profitable glycols and this could constrain EG supply.
Demand into PET is expected to decline on seasonality with the approach of colder weather. However, the pandemic has kept PET demand strong since late March and could remain strong until a coronavirus vaccine is available and end-consumers’ buying behaviour returns to normal. With the onset of winter, antifreeze demand for MEG is likely to increase, as is demand for TEG as a dehydrating agent to prevent natural gas pipes from freezing.
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PET, polyester filament yarn