MEG: Prices Are Up, Is Supply Back?

Despite a generally weak commodity futures market recently, ethylene glycol (MEG) has stood out, maintaining a strong price level even amid a second wave of polyester production cuts. This article examines whether MEG supply has returned as spot prices approach the 4,800 yuan/mt mark.

The answer is: not much. Let's look at the supply from three main segments:

Syngas-Based MEG

Currently, syngas-based MEG units in China are operating at around 70% capacity. Xinjiang Tianye's 600kt/year plant in Xinjiang has increased its output to around 1,400 tons per day. The operating rate of Yuneng Chemical's 400kt/year plant in Shaanxi has also increased. However, other plants like Tianying, Woneng, and Guanghui have seen decreased operating rates. Additionally, a 1.8 million mt/year plant in Shaanxi closed one line for a short period last week, resulting in an estimated production loss of 15-20kt. Several plants, including Yankuang, Hongsifang, Tongliao, Yongcheng, Woneng, and Shenhua Yulin, have maintenance plans from July to September. Thus, the production increase from syngas-based MEG facilities will be limited, with monthly output expected to range between 560kt and 590kt from June to September.

Refining & Chemical Integrated MEG

For conventional MEG production, North Chemical has begun a one-month maintenance shutdown. ZPC maintains daily output at 5,500-5,800 tons, with no immediate plans for capacity increase. Satellite Petrochemical planned to restart its 900kt/year MEG unit in Lianyungang in early July but is now unlikely to do so within the month. ZRCC has no plans to restart before September. Regarding the EO to EG switch, Sinopec East China Company increased the ex-factory price of ethylene oxide (EO) to 6,800 yuan/mt. Apart from Shenghong's 100kt/year EO unit in Lianyungang switching to EG this month, other companies have no confirmed plans for switching. However, if prices remain stable above 4,800 yuan/mt in Q3, further conversions might be possible and should be monitored.

Imports

In the medium to long term, attention should be paid to potential increases in overseas supply, but short-term supply plans and arrivals from major suppliers are mostly set, with little room for unexpected changes. The long-term focus should be on the declining costs of North American chemical products and the widening price gap between the US and China, which could create arbitrage opportunities.

Conclusion

With the recovery of MEG prices and valuation, there are minor increases in the operating rates of some ethylene-based MEG plants, though this is not yet a mainstream trend. MEG supply remains inelastic at relatively low prices. Future supply increases need to be evaluated based on two factors: sustained prices above 4,800 yuan/mt or a significant decline in downstream ethylene products. Additionally, from Q4 onwards, there is a possibility of increased overseas shipments, although other regional supplies still need to be monitored.