AFPM ’19: US MEG steady-to-soft as players eye peak demand, Asia

HOUSTON (ICIS)–US monoethylene glycol (MEG) is steady-to-soft heading into this year’s International Petrochemical Conference (IPC).

There is talk of the downtrend that persisted over the last few months coming to an end, with prices possibly reaching the bottom. But some market players are pushing back against this and expect prices to keep moving down as supply remains lengthy.

Also, the peak season for antifreeze is winding down with the coldest weather over and the peak season for polyethylene terephthalate (PET) has yet to begin.

PET demand into bottled beverages should gradually increase moving forward as the weather warms and summer draws near.

Export activity remains challenged due to tariffs, but there has been a readjustment of trade flows because of the US-China trade war with more material flowing to Mexico, Western Europe and the Mediterranean.

China started imposing 25% tariffs on imports of US ethylene glycol (EG), listed under 1,2-ethanediol, in August 2018.

But prices in Asia appear to be trending upward with the announcement of lower value added tax (VAT), along with improved downstream demand and upcoming outages. US prices can also take some direction from the Asian markets.

As a result, MEG could start to experience upward pressure if demand from PET picks up and if fundamentals in Asia get stronger.

However, this will hinge on the resolution of trade discussions, since China is a major consumer. If that happens, supply and demand fundamentals could see a wide disparity between Q1 and Q2.

Exports could also increase as multiple ethylene oxide (EO)/EG turnarounds are scheduled to take place during the May/June period in Europe.

The industry continues to monitor upcoming new capacity, with supply expected to lengthen considerably by Q1 2020. Sasol has pushed back the estimated start-up date of its new EO/EG unit in Lake Charles, Louisiana, to June.

But it is unlikely that domestic consumption alone will be able to absorb all of this capacity. The integrated PET facility in Corpus Christi, Texas, may come online in mid-2020, but exports are expected to play an important role as well.

Major glycol producers in the US include Eastman Chemical, Huntsman, Indorama Ventures, Lotte Chemical, LyondellBasell, Nan Ya Plastics, Shell Chemical and MEGlobal.

Hosted by the American Fuel & Petrochemical Manufacturers (AFPM), the IPC takes place on 24-26 March in San Antonio, Texas.

Focus article by Tarun Raizada