Asia MEG market faces rising supply, slowing demand

Asia’s monothylene glycol (MEG) supply will get a boost in the near term from start-ups of new plants at a time when demand is slowing down.

Two major MEG units with a combined capacity of 1.65m tonnes/year is expected to begin production within the fourth quarter.

In Malaysia, PETRONAS is conducting trial runs at its new 750,000 tonne/year MEG unit, which could officially start up in November, market sources said.

In China, Hengli Petrochemical’s 900,000 tonne/year unit is due to come on stream in November.

“MEG producers [in Asia] may have to cut operating rates amid the narrowing spread between MEG and naphtha prices,” a regional trader said, citing that upcoming supply is weighing on the market.

On Tuesday, spot offers for November shipment were at $538-540/tonne CFR (cost & freight) CMP (China Main Port) against bids at $530-535/tonne CFR CMP, market sources said.

In the week ended 18 October, MEG prices fell to $549-556/tonne CFR CMP, down by about 2% from mid-September.

MEG is used in the production of polyester fibres, resins and films, as well as polyethylene terephthalate (PET) resin. It is also used as automotive antifreeze.

On the demand side, downstream polyester producers are facing rising inventories as textile converters have wrapped up orders for year-end holiday sales.

The average operating rates of Chinese polyester plants fell to 88.62% in the week ended 18 October, down from 89.06% a week ago.

“The operating rates may go down further if the polyester inventories continue to increase,” a major downstream end-user said.

Demand for polyester usually slows down in the fourth quarter, hitting MEG consumption.