Chemicals Update: Softness along Asian PET chain mitigates MEG outage impacts

Mono-ethylene glycol (MEG) production globally has been curtailed so far in the second half of 2024 due to increased outages, both planned and unplanned. Under normal circumstances, one would expect tighter supply and higher prices as a result, but this has not been the case. 

In the Americas, at least 75kt of lost MEG production has been recorded in the second half, partly due to weather-related incidents. Formosa shut its 1.25Mt p.a. MEG plant at Point Comfort, Texas, on 6 July due to a hurricane, while Dow also shut its 300kt p.a. MEG plant ahead of the storm, restarting on 10 July. Eastman experienced unplanned outages at its 120kt p.a. MEG plant in Longview, Texas, on 19 July and again on 7 September. Shell Chemicals began planned maintenance at its 450kt p.a. Scotford, Alberta plant in early September. Shell also initiated maintenance at its 430kt p.a. MEG plant in Geismar on 3 September. MEGlobal scheduled planned maintenance for its two Canadian facilities—one at Fort Saskatchewan (460kt p.a.) and the other at Prentiss (440kt p.a.)—from 1 to 15 October. Formosa shut its 800kt p.a. MEG plant at Point Comfort, Texas, on 15 August due to an ethylene feedstock shortage, while Lotte Chemical shut its 800kt p.a. plant at Lake Charles, Louisiana, on 13 September due to unplanned issues. Finally, INEOS Oxide declared force majeure at its 320kt p.a. MEG plant in Bayport, Texas, on 20 August due to an unplanned outage. 

In the EMEA region, outages were less pronounced, with the bulk of disruptions noted by Saudi Arabian producers. Both Yanpet and JUPC experienced unplanned outages in Q3, denting production. Together, the producers account for more than 1 million Mt annually. 

In Asia, the bulk of outages occurred in China, as one would expect. In the Far East, prominent outages were seen at ZPC, which unexpectedly shut its 900kt p.a. MEG plant at Zhejiang in September. This followed a brief outage at the company’s 750kt p.a. No. 1 MEG line at the same site, also in September. Shengong Refining and Chemical also unexpectedly shut one line at its 1.9Mt p.a. MEG facility at Jiangsu in the second half of August. In Northeast Asia, Shell plans to take a month-long maintenance period at its 900kt p.a. MEG plant at Jurong in late October. In Southeast Asia, PRefChem dealt with unplanned outages at its 740kt p.a. MEG plant at Pengerang in both July and September. In total, some 450kt of MEG production has been lost in the region so far in the second half of 2024. 

While a notable amount of capacity has been, is, or is expected to be offline, the impact on pricing has been minimal. In fact, prices in the US and Asia have trended flat to lower thus far in Q3, while only Europe has seen an uptick in MEG pricing. The correlation between US and Chinese prices makes sense, considering China is one of the largest recipients of US MEG exports. 

PIERS data (in the graph above) suggests that US MEG exports in 2023 were around 2.2Mt, of which China accounted for around 31% or roughly 616kt. Turkey was the second-largest importer of US MEG at nearly 19%, or roughly 412kt. 

The absence of notable price movement in MEG amid a flurry of outages suggests that factors such as cheaper feedstocks or weaker downstream demand are potential drivers. In regard to products related to MEG, PX prices have fallen precipitously since the beginning of the second half of 2024. The reasons for this are numerous, with the most notable being declines in global crude pricing and higher run rates at Chinese toluene conversion units amid an uptick in margins. Additionally, Chinese and Asian feedstock MX prices are poised to drop with the startup of Yulong Petrochemical’s 3Mt p.a. MX capacities by the end of this year. These factors, coupled with a weak Asian PET outlook, have kept PX prices lower so far in the latter half of the year. 

Ultimately, the most significant factor is China’s PET demand. PET demand drives demand along the chain, impacting PTA, PX, and MEG. Weaker feedstocks and demand have pushed China’s PET prices to a three-year low, according to ICIS. This has led exporters to lower offers, resulting in an increase in Chinese PET being offered into Latin America, putting pressure on regional prices. Added to this, it is prudent to consider that the peak beverage season in the Northern Hemisphere has passed, and seasonal slowness has stifled restocking incentives. In short, MEG outages should, in theory, have had a greater impact, but this has been mitigated by lower feedstock and co-product pricing, PX and PET oversupply in Asia, and general softness throughout the global market. 

By Kevin Allen, Senior Analyst – Chemicals, SSY.