European MEG Prices Decline as Demand Weakens and Feedstock Cost Drops

In the first week of October 2023, Mono-Ethylene Glycol (MEG) prices in the European market unexpectedly fell. The constant downstream demand and low feedstock prices were the main causes of the price drop. Furthermore, market participants noticed that consumers did not need to consume additional MEG and that demand was restricted in derivative markets, indicating a sluggish appetite for purchases from downstream industries.

According to the pricing analyst from ChemAnalyst, German MEG prices have decreased by USD 20/MT, supported by the decline in the upstream Crude oil prices, further easing the feedstock crude oil market. Market participants stated that the price of ethylene has temporarily decreased, and an increase is anticipated in the upcoming weeks.

Regarding demand, the inquiries from downstream Polyethylene Terephthalate (PET) as well as Polyester industries were steady to low. This weakness in buyer appetite extended to the bottom of the value chain, with end-user consumption in key food packaging, automotive, and construction industries also noted to be sluggish. According to market sources, the German Purchasing Manager's Index (PMI) dropped from 41.5 in August to 39.3 in September 2023, reflecting the challenging demand conditions faced by producers amid higher borrowing rates and uncertainty among customers, which consequently impacted the demand for MEG in the domestic market.

Despite the continued weak demand, the supply of the European MEG was reported to be more balanced. Producers tried to lessen the impact of the decreased buyer appetite by maintaining lower production run rates. In the meantime, the German market's MEG prices are under additional pressure due to the low-cost, competitive offers coming from the Asian market.

Meanwhile, in the Asian market, During the National Day holiday in China, the MEG market typically experienced significant stability. Notably, the downstream sectors' operating rate exhibited a decrease, and the MEG production capacity remained restricted. Lower oil prices also had an impact on the stability of MEG prices. The downstream polyester start-up load was steady at about 85%, and the start-up load decreased slightly since some weaving operations were closed for vacation. Positively, the Purchasing Managers' Index (PMI) for manufacturers showed a little uptick, suggesting a slight improvement in buying interest.

ChemAnalsyt, however, projected that the price of MEG may experience a slight increment in its price due to the expected increase in crude oil prices brought on by the conflict between Israel and Palestine. Additionally, downstream demand from the polyester industries is also expected to rise in the upcoming weeks.