MEG Prices in the US and Europe Grapples with Sluggish Demand and Excess Supply
- 07-Jun-2023 12:17 PM
- Journalist: Shiba Teramoto
In the second half of Q2 2023, the Mono-Ethylene Glycol (MEG) market faced several challenges that narrowed profit margins in US and Europe. One significant factor was the decline in US natural gas prices. In the US, the price of MEG is strongly linked to natural gas prices, while in Europe, MEG pricing is more influenced by crude oil and naphtha costs. The decline in natural gas prices in the US and the downtrend in crude oil prices in Europe negatively impacted the MEG market in both countries.
In the USA, the MEG market has been facing pressure from weak demand and oversupply during the second half of Q2 2023. Despite earlier expectations of an increase in buying appetite in the first half of the year, demand remained sluggish. MEG prices remained historically low, and downstream demand for Polyethylene Terephthalate (PET) was weak as consumers sought to economize amid the recession fear. Furthermore, the US manufacturing sector contracted in May, with the Manufacturing Purchasing Managers' Index (PMI) registering a decrease from April. During the week ending 2nd June 2023, the price for MEG stabilized after witnessing a 2% drop in the previous week.
Additionally, the European market experienced squeezed margins due to the dependence on Naphtha and Crude Oil prices, which were found to be declining. The stuttering demand and fluctuating oil prices hampered the downstream packaging markets and lowered the production cost as the feedstock Ethylene market also subsided.
On the supply side, the export of US MEG material remained at a standstill due to low demand from downstream industries. Importing nations such as Turkey, Belgium, Mexico, and Brazil faced increased pressure from the inflow of lower Ethane-fed US Ethylene prices, leading to a decline in MEG prices. Moreover, the reduced production cost in the US resulted in more MEG available for export, contributing to oversupply in the European market.
US manufacturers are expected to face huge stockpiles unless there is a significant disruption, such as a hurricane hitting the US Gulf Coast, where MEG production is centered. However, sources noted that production in the second quarter of 2023 exceeded demand, so stocks should be sufficient to offset any outages.
As per ChemAnalyst, the MEG market is anticipated to continue its downward trend due to sluggish downstream demand and oversupply. It is crucial to closely monitor changes in feedstock prices, such as natural gas, crude oil, and Ethylene, as fluctuations in these raw materials can significantly impact MEG prices.