Trouble in US MEG facilities: shutdowns and market impacts

Since the beginning of this week, parts of the United States have entered a shutdown warning period due to the impact of a cold storm. The facilities we are tracking mainly involve Lotte, Indorama, GCGV, and others, accounting for just over 50% of the total ethylene glycol (MEG) production capacity in the U.S.

US major plant shutdowns

However, according to local weather forecasts, the weather is expected to improve and stabilize by next week. Therefore, most companies preliminarily plan to gradually restart their facilities in early next week. Nevertheless, because the scope of the shutdowns is somewhat broad, the efficiency of the restarts may still be compromised.

Additionally, another 360 kt/year MEG unit in the area was unexpectedly shut down yesterday due to equipment issues, and the restart time is yet to be determined. The supplier has previously indicated that due to the rapid increase in local ethylene prices and the resulting cost pressures, they might consider shutting down a production line in the future. With the shutdown of Line 1 and the upcoming peak period for local facility maintenance, the supplier has announced a suspension of offers for U.S. goods (suspending external sales).

US ethylene price trend (converted to yuan/mt)

Looking at the ethylene price trends in the U.S., prices are currently at a relatively high level, approaching those from September 2024, when a 360kta unit of Nan Ya began shutdowns for maintenance in late September and subsequently restarted in late October as ethylene prices fell. Therefore, the current high ethylene prices also somewhat affect the enthusiasm for starting up local chemical plants.

Furthermore, entering February, U.S. MEG units are entering their scheduled maintenance period. Between February and April, there are clear maintenance plans for five facilities, totaling a capacity of approximately 3.5 million tons, which accounts for over half of the local MEG capacity.

US major equipment maintenance plan

Regarding China's import data, two shipments have already been dispatched in January, and the expected arrival volume in February is around 90kt. Starting in March, U.S. import volumes are expected to decline significantly, initially estimated at 30-50kt, marking a substantial month-on-month decrease compared to the previous months.

Additionally, the Southeast Asian market is relatively tight overall due to shutdown of PRefChem. It is reported that some South Asian supplies have been diverted to the Southeast Asian market. However, based on their external sales plans for Chinese mainland in February, they should be able to make up for the previous volumes of PRefChem.

On the Saudi side, the restoration time for port maintenance has been postponed. The original plan was to resume in late January, but it is now expected to be by early February. As a result, the overall shipping volume for January in the region has been reduced. Therefore, the overall arrival of shipments after the Spring Festival remains noteworthy.

In summary, the MEG import volume in February is expected to be around 570-580kt. The variables for March and April depend on the reduction in U.S. supplies, initially estimated to be around 550kt.

China's MEG imports (forecast)

From a market perspective, if the import trend becomes relatively clear in the coming months, attention should be paid to the resumption of polyester production after the Spring Festival and the dynamics of domestic units, especially the maintenance progress of coal chemical plants.