Monoethylene glycol profitability weakens globally

1. Wide spread between China and Europe MEG

In the first half of 2022, MEG prices in China and US markets were much lower than in European market. The spread between China and Europe has expanded to as wide as around $300/mt. In H1 2022, MEG cargoes were allocated to European market.

2. China market: coal-based MEG more competitive

MEG demand weakened due to the Covid lockdowns. Due to low prices, most MEG producers were suffering losses. However, given coal price control, coal-based MEG unit operating rate reached around four-year high, but the run rate of non-coal-based units fell to multi-year low.

3. Asia market: high cost-capacity exit

In Taiwan, Japan and South Korea, naphtha cracks receded and MEG profits remained negative. Operating rate of MEG units in Northeast Asia remained in multi-year low. Japan's Maruzen Petrochemical has permanently closed its 80kta unit in October 2021 and its 115kta unit in May this year.

4. North America: ethane price hikes, chemicals lose advantages

US ethane price has increased to around 65 cents/gal, doubled from the lowest level in Q1 last year. In H1 2022, US ethylene and MEG markets remained weak. Ethane-to-MEG was around the break-even level or even saw losses.

Operating rate has increased since end-May with the two plants of Nan Ya running around 80-90% and GCGV at 70%. US cargoes to China was around 110-120kt in Q1 according to US census. US exports are expected to increase further in Q3.

5. The Middle East: high operating rate on ample associated gas

Associated gas was ample given high oil prices. The cost advantage in the Middle East remained. Some producers lowered operating rate, but overall rate was still high. Jun shipment to China was expected to decrease, but the loss might be offset after PRefChem restarts in Jul. Meanwhile, cargoes may also reallocated after the demand peak in Europe and India.