Quarterly Update on Global Diethylene Glycol (DEG) Market
For the Quarter Ending June 2021
DEG supplies in the North American region improved compared to the previous quarter, as the restoration of the industrial infrastructure in the Gulf Coast meant better availability of the feedstock, as the several producers ramped up the production rates of Diethylene Glycol in the USA. Major manufacturers such as Dow increased the run rates post the impact of winter storm Uri. However, continuous variations in the prices of upstream Ethylene on back of lacklustre demand from the downstream market maintains a stagnation in the prices of Diethylene Glycol in the second quarter. Demand outlook remained severely hampered as the offtakes from the antifreeze industries plunged amidst the offseason, however enquiries were consistent from the manufacturers of Polyurethanes, Polyether Resins, and plasticizers industries.
The overall market outlook of Diethylene Glycol (DEG) varied across different countries in the Asia Pacific region. At the starting of the quarter the demand outlook was curtailed by significant margins in the Southeast Asian region as the second COVID wave restricted the commercial and industrial activities in India, whereas there remain supply uncertainties as activity in the key trading port in Guangdong province due to rising COVID cases. Due to overall demand dullness, the overall pricing trend in India remained on a down stride throughout the second quarter with Ex-Depot Mumbai discussions settling at USD 945 per tonne in June.
Diethylene Glycol (DEG) supplies in the European region improved in the second quarter of 2021, owing to the recovery in the industrial operational rates post winter season and the restoration in the raw material supplies which restored due to better import volumes from the USA. Inquiries were piled up from the downstream polyurethanes, polyether resins, and plasticizers industry. As a ripple effect of improved supply outlook, the prices of DEG in the European market stabilized in the second quarter of 2021.
For the Quarter Ending March 2021
During the first quarter of 2021, DEG supplies were hindered as the region witnessed a downfall of 68% in upstream Ethylene production amid the rigorous freeze weather conditions in USA gulf region which forced to the regional plants to shut down. Arbitrage with the Asia improved as the domestic buyers becoming more flexible towards the Asian supplies. The demand surged from the downstream sector due to better offtakes from the various industrial segments including unsaturated polyester resin (UPR) sector.
Supplies of Diethyl Glycol remained tight for a larger part of the first quarter, as most of the upstream ethylene was diverted towards the PET manufacturing, followed by several plant turnarounds amid the Chinese lunar new year holidays in mid-February. The demand in China was seen recovering slowly after curtailed downstream unsaturated polyester resin (UPR) rates reported by some downstream convertors. Slackening demand prompted CFR China DEG rates to nose-dive to USD 500 per tonne in mid-February.
DEG supplies in the European region were sluggish during the Q1 2021, as the several refineries were operating at low production capacity amid the cold weather in Northwest European region, followed by the transport disruption in Amsterdam-Rotterdam-Antwerp route due to high water levels. Lack of supplies from USA triggered additional fears amidst importers. DEG demand in the region was stable due to the limited offtakes from the downstream sectors.
For the Quarter Ending September 2020
Dampened demand from the Polyester industry has created an oversupply of Diethylene glycol across Asia. Lack of volume offtakes have triggered a sharp slump in the pricing curve of Diethylene Glycol in the first half of 2020. Several new MEG plant set-ups planned in the Asian countries such as China and Malaysia are delayed till 2021 attributed to pandemic-induced challenges. However, with the revival in market fundamentals, prices of DEG have witnessed a progressive gain in the third quarter. Sentiments seemed bolstered with China estimated to add another downstream polyester capacity of more than 1 million tonnes and curtail its import dependence from US due to the ongoing trade war. which could result in further increase in price of DEG.
With low estimated polyester growth in North America, DEG demand growth is unlikely to keep pace with increase in supply throughout 2020. Reduction in exports due to transportation constraints has created a supply glut in the domestic market which further resulted in downward pressure in the prices of DEG in the region. Diminished demand from the downstream market, has rendered major US DEG players maintain a cautious approach over curtailed margins, thereby increasing inventories and forcing producers to induce reduction in the plant operating rates.
Following Hurricane Laura in August, around one third of production in the US was slashed down, leading to tighter product availability in Europe. Demand from the downstream industries turned better with rising enquiries from the unsaturated polyester resin manufacturers compared to the offtakes for antifreeze or coolant as the pandemic seems to take a greater toll over the downstream automobile industry.