MEG price soar, Navigates Peak Through Supply-Chain Chaos Amidst Geopolitical Turbulence
- 31-Jan-2024 5:24 PM
- Journalist: Patrick Knight
The price of Mono Ethylene Glycol (MEG) has experienced a rising trend in the global market in January 2024, due to high production costs, logistic charges, and chaotic stock management after the recent global supply disturbances. The US MEG market has seen an upsurge of more than 14% throughout January. On the other hand, the freezing cold in a major part of the USA has been a critical point in the swelling of MEG prices due to the shutdown of chemical manufacturing plants experiencing freezing cold during the timeframe. The freezing cold temperatures gripping the United States have ushered in a series of challenges for the country's manufacturing sectors. Manufacturing companies like Nan YA Plastic Corporation and Sasol Chemical Company were forced to shut down production units due to freezing cold weather.
The closure of manufacturing plants disrupts the supply flow, leading to a shortage of goods. This disruption reverberates through the supply chain issues, affecting suppliers, distributors, and retailers. Under these market scenarios, inventory management has become hard to handle and strategize, which is likely to remain uncertain for further period. The MEG prices were observed to hovering around USD 450/MT FOB US Gulf (USA) post witnessing a steep incline (more than 14%).
Moreover, Asian countries are mirroring the same trend as the USA, with MEG prices soaring due to elevated production costs, shipping challenges, and increasing demand from PET manufacturing companies coupled with downstream effects. Stretched logistic freight charges, embracing the ongoing Red Sea conflict in the shipment route, have predominantly impacted trade between the United States and Asia. In January, China faced more than a 4% growth in MEG prices.
Following the same trend, Middle Eastern Countries, especially Saudi Arabia, experienced the highest prices in January 2024 compared to the entire 2023 at USD 499/MT FOB Riyadh, owing to the improvement in demand from the downstream industries amidst global surge in MEG prices. Adding to the difficulties, key players in the MEG market, Eastern Petrochemical Company (SHARQ) and Yanbu National Petrochemical Company, shut down their production plants owing to industrial maintenance and the Red Sea crisis, respectively, impacting overall exports and resulting in a price surge. Another pivotal factor in the rising MEG prices is the continuous boost in crude oil prices attributed to geopolitics. Crude oil prices reflect a jump of 7-9% in January 2024, resulting in the factor to ascend the commodity price around the globe.
Conclusively, analysts anticipate further rise in MEG prices owing to the rise in crude oil prices due to ongoing geopolitical crises, logistics disturbances, as well as an increase in demand for PET production after the winter weather.