Global Dynamics Signal Bearish Trend in Entering Q1 2024 for MEG Market

Mono-Ethylene Glycol (MEG) prices remained stable last week, attributed to its neutral market fundamentals and cost-effectiveness, despite a sluggish commodity market. In the latter part of the week, encouraging developments unfolded, including decreased import volumes, enhanced port activity, and deliberate MEG production reductions at Yulin Chemical and Xinjiang Tianye. Notably, there is also a possibility of Hubei Sanning altering its production strategy in the first quarter of the upcoming year, potentially resulting in a 30% reduction in MEG output.

Simultaneously, the import of MEG from the U.S. and Saudi Arabia is anticipated to experience a significant decline in the first quarter of 2024. This is attributed to heightened shipping costs resulting from congestion in the Panama Canal. As a response, certain suppliers have opted to alter their shipping routes, leading to a temporary increase in transportation duration and consequent reduction in shipping capacity. Transactional data in the market also reveals that starting from October, some U.S. suppliers of MEG have temporarily halted sales to China. Projections suggest that the average monthly arrival of American MEG might decrease to a range of 20-50kt from December 2023 to February 2024.

In Saudi Arabia, operational difficulties have impacted high-cost facilities like Sharq 3-4, resulting in decreased operating rates of MEG due to shortages of raw materials. Additionally, the Sharq 1-2 plants have been non-operational since mid-October, with a scheduled resumption around the end of the year. However, maintenance shutdowns for upstream ethylene plants in January might also prolong the closure of Sharq 1-2 into the first quarter of the upcoming new year. Furthermore, reports indicate the closure of two JUPC units in Saudi Arabia, boasting a combined capacity of 1.3-1.4 million mt/year, and there are intentions to initiate additional shutdowns for other capacities in the region.

Additionally, In the South Korean market, Lotte's first MEG unit with a capacity of 300kt/year has been non-operational since mid-March. The plan was to recommence operations by the end of 2023, focusing on the production of Ethylene oxide. Following this, Lotte Chemical intends to close its second unit, which has a capacity of 400kt/year, situated at Daesan.

Considering these intricate factors, analysts at ChemAnalyst foresee a de-stocking trend in the MEG market persisting into the first quarter. The cumulative de-stocking volume is estimated to reach around 200kt in December and January, signaling a complex interplay of global market forces and regional challenges influencing the MEG market price.