Global MEG Prices Fluctuate Amidst Overstock and Decreased Demand

In recent weeks, the global Mono-Ethylene Glycol (MEG) market has been fluctuating, with a focus on its undervaluation, high inventory levels, and reduced demand. The discussions have delved into various factors influencing the market, including China's capacity expansion cycle, plants exiting the market, and challenges faced in overseas markets.

During the period, the overseas markets increased their capacity by implementing new facilities, with high operational rates in North America, while demand remained subdued in Europe, the United States, and India. Additionally, the North American advantage in ethane prices has led to significant MEG exports to China, contributing to a noticeable increase in visible inventory in the Chinese market. Meanwhile, Facilities in Kuwait and Canada are also operating favorably. Predictions for next year's energy mix and overseas operational rates remain uncertain, but potential supply volume reductions may impact maintenance schedules and contract negotiations.

In the MEG market, abundant supply persists due to an increase in deep-sea shipments from the US, while the overall demand downstream has decelerated in anticipation of the year-end lull season. The week also saw minimal trade activity, as market participants remained cautious on the sidelines due to the imminent new supply from China and a pessimistic outlook on demand.

However, during the past few weeks, China's MEG capacity expansion has slowed down, and some facilities have exited due to cost competition. However, this reduction in plant operating rate amid existing bulk inventories is likely to improve the market in the coming months. Based on these trends, the MEG supply-demand structure may improve in 2024, with an estimated inventory reduction and positive dynamics. However, overall, MEG inventories may grow with planned new plant startups. The easing of costs for consumers is anticipated, with only a few new plants likely to start production during the start of Q1 2024.

Yuneng Chemical's 400kt/year facility and Zhongkun's 600kt/year facility are on track in China, while other planned capacities are experiencing delays or uncertainties. Despite the uncertainties, there is an anticipated reduction in MEG cost for consumers. Additionally, there's a possibility that coal-based producers such as Hubei Sanning might undergo technological upgrades, leading to a potential shutdown of their MEG units by 2024.

As per the ChemAnalyst predictions, the price for MEG is anticipated to decline in the forthcoming periods, owing to the easing cost of production and the decline in the overall consumption rate. Also, the destocking period by the end of this month is also likely to ease the market for MEG.