Published on January 5, 2015
Monoethylene glycol (MEG) markets have been moving strongly in the recent times and the good times for MEG producers are expected to continue for the next two years, unless technological advances in China boost supplies considerably and quickly.
The increasing number of new Middle East suppliers with access to economically viable ethane has limited the restrictions in terms of feedstock. The rising demand from China has helped increase global operating rates to over 90 per cent, a sign that plants are operating to meet market requirements.
China has an annual demand of 13 mt and is expected to account for 59 per cent of global MEG trade of around 14 mt, with supplies flowing in from the Middle East and North America. Up until 2013, MEG was the largest volume chemical imported into China- a trend that is now seen in the PX market. While in India, the demand for MEG is just about 2 mt.
Several Chinese projects are trying to produce MEG from coal. The first coal-ethylene glycol (CTEG) plants started operation in 2010, experts have concerns about the quality of the MEG produced from the plants. Experts suggest that only the Japanese technology (from High Chem) can produce on-spec material for polyester, while the other technology produce an inferior quality that can meet requirements for engine coolants, but not polyester. But if the technology improves then MEG produced can be of an acceptable quality. Around 3.6 mtpa of MEG capacity is being planned on this technology route, including six units based on the Japanese technology.
From 2014-2016, experts see only small capacity expansion of naphtha/gas based MEG. This supply cannot meet the rising demand. The additional capacity without CTEG or MTO-based ethylene is 3.9 mt, while demand for polyester is 4.5 mt. From 2017, markets may experience partial relief from supplies of shale gas based MEG in the US and other projects in the Middle East. However, the timing of such projects may get delayed. Manufacturers in the US may choose to convert ethylene to polyethylene instead of MEG, as majority of the MEG will be assigned to China.
