A clustering of PTMEG production launches in May

The expansion of spandex began to accelerate in 2022. With significant downstream spandex expansion and increased upstream BDO capacity, PTMEG expansion was also accelerating. In the second half of 2023, PTMEG expansion has speeded up. With such a fast expansion, the direct impact has been mitigated due to demand support and the fact that many expansion projects were part of the integrated projects. However, market competition for PTMEG has intensified since the second quarter of 2024, as new PTMEG projects are not integrated and will be sold out to the spot market, and at the same time, downstream capacity expansion slows.

From the above chart, it can be seen that there was a concentrated period of expansion for spandex in the first half of 2022 to 2023, with expansion starting to slow down in the second half of 2023. The downstream expansion driving demand growth laid a foundation for PTMEG demand.

In terms of timeline, PTMEG expansion significantly increased in the fourth quarter of 2023, while with the expansion projects mostly supporting downstream production, thereby minimizing the impact on the market. Although there were a few instances of capacity shutdowns forever, the expansion in 2024 increased notably. In April, with the release of the first set of Hengli Petrochemical, there was an increase in supply. In May, there was a clustering of expansions, with projects from Junzheng Chemical, Huizhou Yussen, and Huaheng Energy all set to start up operation in the latter half of May. Based on the timing of PTMEG production coming online, June and July are expected to see a new peak in supply, and some factories have plans for more than one project. The competition in PTMEG market is intense in 2024.

The price difference between PTMEG and its main raw materials, since the fourth quarter of 2023, has been rapidly decreasing. Currently, negotiations indicate that the price difference has fallen to around 3,000yuan/mt, with some lower-priced sources in the market causing negotiation standoffs and increasing pressure on sales. PTMEG is now in a situation where supply exceeds demand, intensifying competition among companies, possibly heralding the beginning of a protracted battle.