OUTLOOK ’19: Europe MPGI availability could be impacted by upstream factors, other considerations too

LONDON (ICIS)–European mono propylene glycol industrial grade (MPGI) availability could be impacted by upstream constraints in 2019, but there are other considerations.

Expected tightness in the upstream propylene oxide (PO) market – mainly due to a series of cracker and PO turnarounds in 2019 – could have a knock-on effect on MPGI availability.

“Supply should be relatively stable, although shortages of feedstock propylene oxide in Europe could cause some headaches for the MPG market again,” according to ICIS analysts Rhian O’Connor and Valentina Cherubin.

“[There are] no new capacities coming online in Europe but with the heavy PO turnaround schedule and tightness on PO, I would expect PG also to be tight [in 2019],” said one PO/MPG producer.

However, this view was not shared by all.

One main MPG buyer from the downstream unsaturated polyester resins (UPR) sector said it has sufficient MPG coverage for 2019, despite talk of expected PO tightness.

Availability of PO and in turn MPGI also depends on MPGI demand and other PO derivative performance.

There is some uncertainty at the end of 2018 as to when demand from the main downstream PO derivative polyols market is likely to pick up.

If polyols activity were to remain muted then this could provide some PO supply flexibility for other derivatives such as MPGI.

US/China trade tensions could also have repercussions on MPGI availability in Europe in 2019, but a lot will depend on the outcome of trade discussions between these two nations.

If the temporary trade truce between the US and China as of the first half of December were to curb the tariff escalation for chemicals on the third round of tariffs list, of which MPG is included, then increased arbitrage possibilities from China to Europe are less likely in this respect.

However,  if the tensions between the two nations were to escalate again, then this could mean a lot of MPG volume in China would need to find a home and Europe could be a prime destination.

“The Chinese economy is more suffering out of this [the trade tensions] than the US,  I really believe this will have long term effects and this may have an arbitrage effect to Europe.” said one European MPG producer.

While not all players can accept MPG material from China, this very much depends on application and other factors,, a possible influx in imports from China into Europe could increase MPG availability in Europe in 2019.

And this in turn could help mitigate any possible upstream related tightness for MPGI.

MPGI demand, by contrast, is subject to less variables, with economic and seasonal factors likely to be the main drivers.

Despite an economic slowdown during 2018, MPGI demand is expected to continue to grow in 2019, albeit moderately.

“MPG demand will continue to grow in Europe at around 1.6% in 2019, roughly in line with GDP. Growth should continue for UPR, and for cosmetics, food and pharmaceutical applications,” according to ICIS Analysts Rhian O’Connor and Valentina Cherubin.

Aside from economic factors, MPGI demand for certain sectors is affected by seasonality to some extent.

The MPGI market sentiment in 2019 could also be affected by upstream price developments and margin considerations from 2018, following a narrowing in the spread between MPGI and upstream propylene during 2018. However, market factors are likely to be the main driver.