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MEG prices under pressure in March as supply balloons [ 02 Mar, 2010]
Asia monoethylene glycol (MEG) prices may continue to weaken this month as regional supply gets a major boost amid soft demand, which is reflected in high levels of inventories at ports, market sources said on Tuesday.
The upward momentum in MEG spot prices quickly fizzled out, falling to $970/tonne (€718/tonne) CFR (cost and freight) China Main Port (CMP) on Monday from more than $1,000/tonne CFR CMP mark right after the Lunar New Year, according to global chemical market intelligence service ICIS pricing.
China was on holiday from 13-21 February for the Lunar New Year celebrations.
“We forecast a downward trend in MEG market in March, because of brimming port inventories in China and additional supplies from start-ups and restarts of several regional MEG plants,” a key regional MEG producer said.
Current MEG inventories at Chinese main ports were estimated at over 450,000 tonnes, well above normal levels of around 300,000 tonnes, a source at a Chinese polyester producer said.
Storage tank availability were expected to remain tight until April, when about 89,000 cubic meters of new storage facilities at the Zhangjiagang port would be launched by Changjiang International – eastern China’s largest logistics company, the source said.
About 50,000 cubic meters of the new storage capacity would be reserved for MEG, he added.
But this may not be enough to accommodate the strong growth in MEG supplies, industry sources said.
MEG supply would get about 70,000 tonne/month boost this month as three large regional plants with a combined capacity of 1.51m tonnes/year were expected to launch products, said a source at a key regional MEG producer.
The new MEG capacity in March represents 9% of overall MEG capacity in Asia, industry sources said.
Some plants, meanwhile, had just restarted operations like Nan Ya Plastics’ 400,000 tonne/year MEG unit in Taiwan that came back on line in late February. The plant had been shut for about six months from August 2009 due to technical problems, said a company source.
The plant was running at full capacity since start-up, the company source added.
Meanwhile, petrochemical majors Sinopec and Saudi Basic Industries Corp (SABIC) started up their new 360,000 tonne/year MEG unit in Tianjin city during the Lunar New Year holidays.
The new line would keep operating rates at around 70% over the next three months restricted by naphtha supplies, a source at the joint venture company said.
Around 13,000 tonnes per month of MEG from the plant would be supplied to the domestic market in China, while the remaining 7,000-8,000 tonnes/month would be fed to the 300,000 tonne/year polyester plant of Tianjin Petrochemical, industry sources said.
Shell, meanwhile, was expected to ramp up operating rates at its world-scale 750,000 tonne/year MEG plant in Singapore after the start-up of its upstream 800,000 tonne/year ethylene cracker. The start-up was expected within the first quarter.
The MEG unit has been running at relatively low rates since it started operations late last year as it had to be fed by high-priced ethylene bought from the spot market, industry sources said.
MEG supply maybe further augmented from cargoes from the Middle East, market players said.
“MEG imports from the Middle East were expected to grow in the coming weeks along with the recovery of production,” said a major regional trader.
Eastern Petrochemical (Sharq) and Yanbu National Petrochemical (Yansab) of Saudi Basic Industries Corp (SABIC) had restarted their MEG plants with a combined capacity of 1.27m tonnes/year in mid February, after technical problems shut the facilities sometime in December 2009, industry sources said.
Weakness in upstream ethylene prices would also weigh on MEG market, industry sources said.
Ethylene prices have fallen below $1,300 tonne/year last week due to weak buying sentiment for March cargoes, with the impending start-up of Shell’s 800,000 tonne/year cracker in Singapore casting a pall on the ethylene market, industry sources said.
Meanwhile, some factors could ease the downward pressure on MEG prices like the scheduled maintenance at some MEG plants in China, market players said.
CNOOC and Shell Petrochemicals were scheduled to shut their 320,000 tonne/year MEG plant in the southern Guangdong province for a two-month maintenance turnaround from 1 March, with production loss estimated at around 29,000 tonnes/month, said a company source.
The shutdown would be line with the 20% capacity expansion at the companies’ 800,000 tonne/year cracker at the same site, industry sources said.
“We also cast hopes on the improving demand from downstream polyester industry,” a Chinese trader said, citing that polyester production traditionally peaks starting this month.
Source: ICIS
Global MEG demand to grow by 6% in 2010 [ 22 Feb, 2010]
Global monoethylene glycol (MEG) demand is expected to grow by about 6% in 2010, with China and India leading the way, an industry executive said on Monday.
“The growth in emerging geographies like China and India is closer to 7-8% range,” said Ramesh Ramachandran, CEO and president of MEGlobal, one of the world’s leading MEG suppliers.
“You have to allow a few more months in 2010 to pass to see how the American and European markets are growing, but net I would say 6% growth globally is a good estimate,” Ramachandran told ICIS news by telephone from Dubai.
Total global demand for MEG, a commonly used intermediate in the production of polyester fibres that go into clothes, was an estimated 19m tonnes/year, according to Ramachandran, who took his current position in the United Arab Emirates-based company in January.
According to industry executives, China’s annual demand for MEG was around 7m tonnes, whereas India’s domestic demand was estimated to be about 1.5m to 2m tonnes despite similar-sized populations. Industry players therefore argue that the potential for MEG demand growth in India is huge.
“What is unique about the polyester market, especially for the Indian population, is that the average Indian wears a lot more fabric than the rest of the global community simply due to cultural issues. Another positive factor is that polyester is 'bread and butter' fabric for the lower and middle class segment of the [Indian] population,” Ramachandran said.
MEGlobal was “most definitely” looking at expanding its capacity, but the “key emphasis is to figure out where to grow”, Ramachandran said.
Going forward, Ramachandran said that location, ensuring proximity to the market, technology and feedstock availability were the main considerations for MEGlobal, which is a joint venture between The Dow Chemical and Petrochemical Industries Company (PIC) of Kuwait that was set up in 2004.
“Even if we start in 2010 it is going to take two to three years for new capacity to come on stream,” he said.
In recent months industry players have expressed concern over new MEG capacities emerging from two new plants in Saudi Arabia (PetroRabigh and Sharq) and the Shell Chemicals plant in Singapore.
“But you know what? We are a cyclical industry, that is not new to us and [it is] the name of the game for these kinds of industries,” Ramachandran said, adding that he expected that new capacities might take two to three years before reaching “a steady stage”.
"Global GDP is growing at 2% and we [MEG demand] are growing by 6%. If you look at where one would go to invest in this industry, there are not a whole lot of products out there that have this multiplier to the GDP growth,” he added.
Source: ICIS
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