Asia DEG market outlook remains downbeat amid ample supply, demand slowdown

SINGAPORE (ICIS)–Asia diethylene glycol (DEG) market outlook is poised to remain downbeat in the near term as ample supply and  demand slowdown amid coronavirus pandemic weighs on market sentiment.

DEG is a byproduct in monoethylene glycol (MEG) production, and is mainly used in the manufacturing of saturated and unsaturated polyester resins, polyurethanes, and plasticizers.

DEG supply in China is getting longer after a total of 215,000 tonne/year new capacity from Hengli Petrochemical and Zhejiang Petrochemical came on stream early this year.

Hengli Petrochemical has a capacity of 150,000 tonnes/year and Zhejiang Petrochemical has a capacity of 65,000 toones/year.

Furthermore, the influx of imports from India and the US are diverted to China amid the shrinking demand in overseas markets.

“Supply is more than enough now, but demand could not digest it. Demand which was hit by coronavirus will not recover in a short time,” a regional trader said.

“Most traders prefer offloading cargoes to clear their positions given the gloomy outlook,” the trader added.

Demand in China is recovering at a slower pace with average operating rates of downstream unsaturated polyester resin (UPR) sector pegging at 37%.

Many downstream end-users said their export orders have been postponed or cancelled amid disrupted economy caused by coronavirus outbreak in the world.

“We have to sell feedstock in the spot market as our export orders were cancelled,” a major downstream producer said.

“If downstream demand remains weak, DEG market will be still under pressure,” the producer said.

Spot DEG prices have come down by more than 40% to $375-390/tonne CFR (cost & freight) CMP (China main ports) in the week ended 24 April since the beginning of the year – a level which has not been seen since SARS crisis in 2003, according to ICIS.

Focus article by Judith Wang

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(Thumbnail image: DIDP-plasticizers-ExxonMobil)