US EG suppliers mull options with 85% of capacity stricken by winter storm

Author: Antoinette Smith

2021/02/18

HOUSTON (ICIS)--Most US ethylene glycol (EG) capacity is at reduced rates or shut down as a result of a winter storm that has knocked out power for millions of people and business, and threatened water supply.

Nearly 4m tonnes/year of US EG capacity is affected by the storm, according to the ICIS Supply and Demand Database. This represents 85% of total US EG capacity.

The curtailed production led MEG prices in Asia to surge by 11% as that region returned from the Lunar New Year holiday.

The US is a major exporter of MEG to Europe and ships out limited volumes to Asia.

Affected US plants are as follows (as of time of writing):

Company Location
Eastman Longview, Texas
Formosa Point Comfort, Texas
Indorama Port Neches and Clear Lake, Texas
Lotte Lake Charles, Louisiana
LyondellBasell Bayport, Texas
MEGlobal Freeport, Texas
Sasol Lake Charles, Louisiana

Separate force majeure declarations have been made - LyondellBasell announced its force majeure this week, and Formosa had an existing declaration due to feedstock issues - while other suppliers are allocating sales and evaluating options.

MEGlobal is on sales control with regular customers and discussing options now, according to a source familiar with company operations.

"Feedstock suppliers are in question, so no idea when this will resolve," the source said.

Regarding Sasol's situation, a company spokesperson said, "No declaration has been made at this point, given we are still assessing the situation."

Tight supply has been an issue across chemical markets including, related products butanediol (BDO), which can be used instead of DEG to make polyester polyols, and phthalic anhydride (PA), which can be used along with DEG in unsaturated polyester resins (UPRs).

"A lot of supply chains were still trying to recover after impacts from Q4, so this current round of FM is tough to endure," said a buying source.

STRUGGLING TO REBALANCE
Before the storm, monoethylene and diethylene glycol (MEG, DEG) production had been struggling to catch up from widespread outages in September and October.

Hurricane Laura shut down plants in southwest Louisiana in late August, and planned maintenance idled other plants - in all affecting two thirds of North American production in late summer/early autumn 2020.

Downstream polyethylene terephthalate (PET) production, which had already been running hard to met strong pandemic-related demand, was curtailed by the MEG shortage.

Although all plants had restarted by late October, pent-up as well as current demand consumed all available quantities. Contract customers have been able to obtain needed volumes but spot cargoes have been extremely limited, pushing prices to 2020 shortage levels.

In February MEG spot cargoes had begun to emerge after being sold out for months, though spot DEG was still very hard to find.

Co-product DEG is only about 9% of EG yields, with MEG around 90%. As a result, DEG supply is much more prone to sudden shortages and prolonged periods to rebalance.

Triethylene glycol (TEG) also has been affected, though it represents a very small portion of the market and is nearing the end of its typical winter demand season.

Consumption of MEG has remained strong, with Americas PET production unable to meet demand particularly from the packaging sector. Imports have filled the gaps, with elevated freight costs being passed down to buyers.

DEG demand continues to be healthy, with residential construction in particular driving consumption both in polyurethanes (PUs) in durable goods, as well as in UPRs, which have numerous construction and remodelling end-uses.

MEG is an intermediate in the production of polyester fibres and polyethylene terephthalate (PET) bottle resins, and as an automotive antifreeze.

Applications for DEG include de-icing fluids, surface coatings, UPR and polyester polyols.

Co-product TEG is used in gas delivery pipes as a dehydrating agent to prevent the gas from freezing. It is also used in the oilfield sector to help extract natural gas.

Glycol producers in the US include Dow, Eastman Chemical, Formosa, Indorama Ventures, Lotte Chemical, LyondellBasell, MEGlobal, Sasol and Shell Chemical.

Focus article by Antoinette Smith

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