Global TEG Price Surge Amidst Production Challenges and Robust Natural Gas Processing Demand

The market situation of Triethylene Glycol (TEG) has exhibited a bullish trend in July 2023 in North American, Asia-Pacific, and European markets. Increasing prices by 13% have been recorded in the United States and India, 8% in Germany, and 10% in China despite declining prices of upstream Ethylene Oxide. Production of TEG was recorded at minute levels due to low production of MEG and DEG because of the poor performance of the downstream plasticizer and antifreeze industry. A high demand for TEG rose from the downstream demand for natural gas processing. Production cuts in MEG and DEG automatically led to diminished levels of TEG in the face of high demand from downstream natural gas processing. Increasing crude oil prices globally by approximately 20% also played a crucial role in hiking commodity prices.

Key players in the manufacturing industry of TEG and downstream plasticizers have stated that challenging macroeconomic conditions are likely to prevail in the 3rd Quarter and extend towards the 4th Quarter of 2023 as the sales volume of plasticizers continues to decline by 23% on a Year-on-Year basis. However, the prime factor in the appreciation of prices of TEG was diminished inventories which resulted from Mono and DEG production cuts in the face of constant demand from downstream natural gas processing industries. Despite the moderation of inflation, the challenging macroeconomic conditions around the world cast a depressing outlook as the lagging effects of tighter monetary policies on consumer demand take hold. Additionally, a slower-than-expected demand recovery in China, which is one of the major players in the downstream plasticizer manufacturing industry, also contributed to the poor performance of the plastic and food packaging industry, which further compelled production cuts in MEG and DEG. In the current scenario, prices of TEG are unlikely to depreciate as MEG and DEG production levels are expected to remain low, which consequently leads to low availability of TEG in the face of constant demand from the downstream natural gas processing industry.

In the United States, industrial activities remain weak, with manufacturing PMI contracting to 46.3 (as reported by the FRED), even though consumer demand from the food packaging industry remained resilient owing to the inflationary behaviors of stocking comestibles amongst consumers, which was further bolstered by low unemployment levels. Prices of TEG remained bullish owing to constant demand from downstream demand as a dehumidifier in natural gas pipelines. Demand for export orders was also recorded to be healthy as demand for utilization in the natural gas pipelines took hold.

Despite declining energy costs in Germany, plasticizer sales volume was down by approximately 14% because of prevailing recessionary conditions and PMI reaching 38.8, as reported by Statistics Bundesamt. Declining PMI indicated a weakening of industrial activities in the region, and the plasticizer industry's performance was disappointing, leading to declining production levels of MEG and DEG, which consequently led to a low inventory of TEG in the face of healthy demand from natural gas processing units. The challenging economic conditions are likely to extend towards the end of 2023 and are unlikely to exhibit a significant recovery, thereby indicating production levels to be low. A surge in the prices of TEG was mostly attributed to low levels of TEG amidst high demand from natural gas processing units.

Key market players in the downstream plasticizer manufacturing industry reported that the anticipated economic rebound has yet to materialize. Consumption has increased moderately as the GDP growth rate of China of around 4.5% fared better than the countries mentioned earlier, with manufacturing PMI hovering around 100, indicating that inflation is under, according to NBS Data. The surge in the prices of TEG was mostly attributed to diminished supplies from exporting country United States, in the face of constant demand from the natural gas processing industry.

The Indian market for TEG fared much better than the above markets, as demand outpaced higher input costs. Healthy expenditure activities were observed in the 2nd Quarter of 2023, leading to price increments. Additionally, market optimism for the construction industry rose, with residential sales exhibiting an increment of 17% in July 2023. Heavy demand from the downstream construction industry and constant demand from natural gas processing units were responsible for maintaining the bullish market of TEG.