APIC ’17: Asia/Mideast MEG faces challenging H2 on India start-up

SAPPORO, Japan (ICIS)–Asian and Middle Eastern monoethylene glycol (MEG) producers are facing a challenging second-half 2017 amid an expected start-up of a new capacity in India, market sources said on Thursday.

Indian conglomerate Reliance Industries Limited (RIL) is on track to begin production at its 750,000 tonne/year MEG plant in Jamnagar, Gujarat in June, according to a company source.

The start-up will have an impact on the Asian and Middle Eastern MEG markets in the near term as India is a net importer of the material, taking in an annual volume of around 1m tonnes, most industry sources said on the sidelines of the Asia Petrochemical Industry Conference (APIC) being held in Sapporo on 18-19 May.

RIL’s MEG plant, which will use offgas from the company’s refinery as feedstock, is expected to produce on-spec cargoes by early July, other market participants said.

The Indian company has existing MEG units with a total nameplate capacity of around 740,000 tonnes/year.

But India is not expected to become a net MEG exporter soon amid strong domestic demand in downstream polyester sector, market sources said.

India’s polyester consumption is projected to grow at around 7-8% this year, according to some industry players. The forecast is in line with the GDP growth of Asia’s second-biggest emerging economy.

RIL is expected to focus more on domestic MEG consumption instead of exports, according to several industry participants.

“Reliance Industries, being a major polyester producer, will likely look to consume the additional MEG internally before selling,” a market source said.

The company may also look at bundling other products when selling MEG, and this would require higher capital to secure its export cargoes, some market sources said.

Price pressures on the Asian MEG market will likely come from increased availability of Middle East and southeast (SE) Asian cargoes as Indian import demand will shrink when RIL’s new plant starts up, industry sources said.

Cargoes from these origins presently make up the bulk of India’s MEG imports. Some market participants expect these cargoes to flow into China.

But China may be able to absorb the increased volumes amid expected start-ups of new downstream polyethylene terephthalate (PET) plants and a possible expansion at current polyester textile facilities in the country, industry sources said.

Operating rates at China’s domestic MEG facilities will also be crucial to look at in the near term as they will have an impact on contract volumes to Chinese polyester producers, they said.

Chinese polyester industry is expected to grow at around 4-5% in 2017, slightly higher than last year’s growth, according to some market players.

Focus article by Eric Su

Picture (top): Textiles are the major downstream of monoethylene glycol (MEG) (Source: Design Pics Inc/REX/Shutterstock)