For the Quarter Ending June 2023
North America
Mono Ethylene Glycol (MEG) prices fell throughout the second quarter. In the first half of the quarter, market participants were struggling with unsold stocks and opted for price adjustments. On the other hand, producers reduced run rates to meet modest demand. In addition, despite these poor fundamentals, the market was supported by high producer inventories and the sluggish global economy, which continued to have a significant impact on consumer demand. As a result, in response to the subdued demand environment, companies cut back on their purchasing activities and inventories and reduced their operating rates, which put further downward pressure on purchasing costs. According to the Federal Reserve Economic Data (FRED), the Consumer Price Index (CPI) rose from 303.294 in May to 303.841 in June, indicating that US annual inflation rose in June. Finally, weighed down by the economic uncertainty, the price of MEG fell and settled at USD 559/MT FOB US Gulf in June 2023.
APAC
The price of Mono Ethylene Glycol (MEG) declined throughout the second quarter. A major South Korean producer put further downward pressure on the market by issuing a tender to sell its 6,000 tonnes of MEG in June at a discounted price. The increase in inventories and a slowdown in downstream procurement by the polyester and packaging industries further dampened buying enthusiasm. In addition, analysts reported that supply chains from the US and Saudi Arabia had continued to improve and that production costs had eased as a result of the fall in the price of ethylene and crude oil. In addition, market transactions were mostly based on immediate needs, as terminal operators were not very enthusiastic about entering the market. Furthermore, South Korea's consumer price index rose 2.7% year-on-year in June 2023, easing for the fifth consecutive month to its lowest level since September 2021, supporting the central bank's move to pause its tightening cycle earlier this year. Finally, the price of MEG settled at USD 492/MT CFR Busan.
Saudi Arabia
In the Saudi Arabian market, the price of MEG collapsed throughout the second quarter of 2023. During the first half of Q2, crude oil prices fell on the back of gloomy global economic forecasts. However, due to the lack of demand, producers reduced their prices. At the same time, buying activity from Europe and the sub-continent had declined, dampening buying interest. On the supply part, logistics were operating smoothly, but sluggish downstream demand created huge stocks in the warehouses. However, inflationary pressure had weakened consumer spending, thus weakening the demand in the region. From a demand perspective, the demand from downstream industries, specifically the packaging sector, was not strong enough to support an uptrend in MEG prices. Although, some manufacturers in the end-use beverage and bottling sectors had already started to secure material for upcoming orders. Meanwhile, Saudi Arabia's inflation rate rose to 2.8% in May, according to government data, weighing on consumer spending. Finally, the price of MEG fell to settle at USD 426/MT FOB Riyadh.
Europe
The European Mono Ethylene Glycol (MEG) declined throughout the second quarter due to low demand and an oversupply of the material. Industry experts attribute this decline to overstocking in the packaging sector, indicating a saturated market in the European market. The run rate of MEG units remained optimal as upstream ethylene supply increased and market inventories increased slightly. However, the Verdi strike on 4 May in protest against higher salaries had an impact on logistics operations, but freight rates remained low. However, it had little impact on the market as a whole due to weak demand and adequate stocks in the domestic market. Demand from downstream industries, particularly the packaging sector, was also not strong enough to support an upward trend in MEG prices. Meanwhile, monthly European producer prices fell by 0.9% in May, highlighting the challenges facing the economy in reviving demand and restoring economic growth. Finally, the price of MEG fell to settle at USD 529/MT FD Hamburg.
For the Quarter Ending March 2023
North America
During the start of Q1 2023, both the price of feedstock Ethylene and the market for Mono-Ethylene Glycol (MEG) increased as a result of healthy purchasing activity from downstream industries. However, prices seemed to be decreasing in the second half of the quarter as a result of huge inventories and low offtakes from the downstream packaging sector, consequently, despite the fact that producers allegedly had large inventories of material and were likely to reduce their margins in order to initiate sales. The demand for MEG material from the downstream PET bottles industries was still low, and there was no improvement even after some relaxation in the prices. As a result, the US market for MEG was witnessed fluctuating throughout the Q1 of 2023.
APAC
Asia’s Mono-Ethylene Glycol (MEG) market recovered during the week as supply cuts in China further supported the pricing. There was a tight supply availability of material as several integrated MEG units in China had either shut down or were expected to shut down amid persistently poor margins. In the meantime, downstream industries in Jiangsu and Zhejiang had reduced their operating rate to about 70%. Thus, amidst the tight supply of material and the volatile crude oil market, MEG prices trended upward. Additionally, in the second half of February, Fund Energy had a 10-day maintenance schedule for their 500 kt/year MEG plant. Satellite Petrochemical also shut down its 900kt/year MEG facility at the end of January for approximately 15 days of maintenance. Zhejiang Petroleum & Chemical likewise planned to reduce the operating rate of its MEG plant to around 60% in mid-February due to the turnaround of one of its crackers. As a result, the MEG market in Asian countries fluctuated, with pricing settling at USD 669/MT FOB Shanghai during March.
Europe
The price of Mono-Ethylene Glycol (MEG) on the German market increased as a result of strong polyester sector demand in the first half of the quarter. The second half saw pressure from the fundamentals of weak demand and oversupply on the European MEG market, which in turn put pressure on the European Ethylene value chain. Production rates were low, between 70% and 80%, as producers tried to counteract the consequences of the weak demand. As a result, there was a general lack of purchasing activity throughout the entire value chain, with extremely low end-use consumption. As a result, at the end of the quarter, the German market for Mono-Ethylene Glycol appeared bearish.
A slowing economy's weak demand highlighted the significant inventory overhang and kept export and local pricing under pressure. Port closures and shortened port operation hours caused delays in cargo imports and exports in the USA. The need to restart port activity was made even more urgent by Hurricane Ian, which extended shipping delays and forced ships to dock at ports on the East and Gulf Coasts while the West Coast struggled with supply-chain problems, labor disputes, and a shortage of storage space. The combined effects of Hurricane Ian and the mild weather across the rest of the US reduced demand. Fear of a recession has enveloped the US market, lowering demand for MEG in the area. Meanwhile, the reduction in demand from downstream PET Bottles and the Polyester sector has caused MEG prices to stabilize in the region as inventories were limited amongst the manufacturers.
The downstream operating rate fell, and the accumulated inventories at warehouses pressurized the end-use industries as the inventories piled up. However, because offtakes in Taicang and Zhangjiagang were both 6,000 tonnes during October, the operating rate remained steady. The local market's MEG supply was stable, and some facilities had planned to even reopen after the first half of Q4. There was the restart of the 300,000-ton units in Inner Mongolia and the 600,000-ton units in Sanning, Hubei. As a result, it was noticed that the domestic Ethylene Glycol supply recovered, thus reducing the burden on pricing. In conclusion, the cost of MEG in South Korea was roughly USD 587 per MT CFR Busan during November.
Due to moderate demand and volatile natural gas prices, LyondellBasell had lowered its operating rates to 60% in Germany for feedstock ethylene, thus reducing the supply of Ethylene. Meanwhile, consumers' sentiments were collapsing under the weight of inflation as rising energy prices and inflation reduced margins and decreased demand. Additionally, the increase in the European economy caused by growing inflation rates has reduced the production capacities of MEG producers as well as the spending power of consumers on polyester and downstream packaging. Owing to the above-mentioned reasons, MEG Price in Europe witnessed a partial increment throughout Q4 and settled at USD 689/MT FD Hamburg during December.
