The global Mono-Ethylene Glycol (MEG) market has recovered since the beginning of September 2023, given the significant demand from downstream polyester industries. During the week ending on September 15th, 2023, prices immediately increased as port inventories significantly decreased, and several traders’ moods improved. The current price for MEG in the US market rose, with prices hovering at USD 628/MT FD Hamburg.

The decline in the overall inventories came due to the reduction in the overall production capacity, as many plants in the Asian market planned for the maintenance turnaround, culminating in the reduced supply in the region.

This reduction in MEG supply has significantly shifted the market forecasts regarding the supply-demand balance. Previously, the industry operated under the assumption of inventory accumulation. However, the current outlook has transitioned towards expectations of a tight supply-demand balance or even destocking. This expectation shift is due to the robust demand for polyester products and positive feedback throughout the industrial chain.

In the US, the cost of producing MEG in the domestic market was high because of the higher-than-average feedstock ethane prices. Natural gas costs have also increased, which has had an equal influence on MEG pricing in the domestic market. These escalations have led to higher production expenses in these regions, potentially discouraging manufacturers from producing MEG in large quantities.

Within the Asian market, specifically in China, several manufacturing facilities have planned operational suspensions due to intense competition in the expensive feedstock market for ethylene oxide, a critical component in MEG production. Key producers, including Fund Energy, Zhenhai Refining & Chemical, and Zhongke Refining & Petrochemical, have implemented production cuts for MEG. For instance, Zhongke Refining & Petrochemical Corporation (ZRCC) has decreased MEG production rates by approximately 50%. These reduced rates are expected to persist significantly due to ongoing maintenance activities at facilities such as Shanghai and Yangzi.

In summary, the decline in MEG inventories, driven by reduced production capacity in Asia and cost-related challenges in the US, has caused a notable shift in market dynamics and forecasts.

In conclusion, ChemAnalyst forecasts that the price for MEG might remain on the upper side, owing to the increased demand fundamentals from downstream Polyester industries. However, there is an anticipation of a supply shortage due to the reduced operating rates of units in the Asian market. However, the supply to the European and US markets is also expected to witness tightness due to the anticipated increment in the feedstock crude oil and Ethane prices.