Chemical profile: Asia MEG

04 July 2014 10:13 Source:ICIS Chemical Business

The main use for monoethylene glycol (MEG) is the production of polyester fibres, resins and films. Polyester fibres are the main consumer with the second-largest use in polyethylene terephthalate (PET) resin, followed by automotive antifreeze.

From the start of 2014, prices have been on a downward trend. There was a surge in imports in the China market, limited tank storage and weaker downstream polyester demand, accompanied by a weakened Chinese yuan against the US dollar and poor macroeconomic factors.

Polyester demand in China slowed down since early January before the Lunar New Year at the end of January. A short-lived spike in demand was not seen until the end of March, despite the period after Lunar New Year being a typical peak demand season in the country. The rise in MEG prices from mid-May was spurred by downstream demand, but this was tempered by more turnarounds at polyester plants in late May and June.

Meanwhile, supply of MEG imported into China in January was abundant, indicated by inventory build-ups in China’s eastern coastal areas to 1.057m tonnes by mid-May. Naptha-based MEG capacity of 360,000 tonnes/year and an estimated coal-based capacity of 500,000 tonnes/year were added in the first of half of 2014.

Mechanical woes at the MEG plant at Formosa Petrochemical Corp’s (FPCC) subsidiary Nan Ya Plastics resulted in an unplanned shutdown in early March. The plant with a capacity of 720,000 tonnes/year was restarted after about 10 days. China’s Sinopec shut two units with a combined capacity of 875,000 tonnes/year in April-June.

Supply in the second half of 2014 is expected to be tight amid more turnarounds in northeast Asia and the Middle East. Asia had an additional 6.9m tonnes/year in net new polyester capacity in 2013 and is likely to add another 5m-6m tonnes of new polyester capacity in 2014.

The Asia MEG market was bearish in the beginning of 2014. Prices dipped to $900-909/tonne (€662-667/tonne) CFR (cost & freight) CMP (China Main Port) at the end of February before rebounding to $934-950/tonne in early April. Prices then slipped to a 21-month low of $884-893/tonne in early May.

From early May to June, prices were on an uptrend and reached $998-1,016/tonne by the end of June, boosted by improved market sentiment on the back of a strong uptick in the purified terephthalic acid (PTA) and paraxylene (PX) markets.

MEG is produced by direct oxidation. Ethylene is oxidated in the presence of oxygen or air and a silver-oxide catalyst. Fractional distillation under vacuum of the crude ethylene glycol mixture separates the MEG from the diethylene and triethylene glycols.

MEG in Asia will be balanced to tight, according to market sources. Global polyester demand is expected to reach nearly 70m tonnes/year by 2015, up by about 6%/year from 60m tonnes in 2013, according to market sources. The primary driver of demand growth will come from China, India and Indonesia.

MEG supply might struggle to meet the needs from the PET and polyester fibre sectors in the short term but this shortage might be mitigated by MEG expansions later in 2015.

In Asia, there are three oil-based MEG projects, with a combined capacity of 1.35m tonnes/year, due to be completed in 2015. Several projects are being built in China, using coal and methanol. The most promising are the methanol-based projects, and the first 500,000 tonne/year plant is likely to come online at the end of 2015.

By Jeffrey Ong