Surge in Tri Ethylene Glycol (TEG) Prices Amidst High Feedstock Costs in US and European Markets

In the first half of March 2024, the global Tri Ethylene Glycol (TEG) market continues to follow the trends observed in the previous month, with prices steadily rising due to various factors such as supply-demand imbalances, increased production cost of TEG, and challenges from the geopolitical uncertainties. In this period, TEG prices in the US saw a rise of roughly 2.6%, following the previous month's surge of 7.75%. Simultaneously, the cost of TEG's feedstock, Ethylene Oxide, also increased by approximately 1.5%. During this period, the US WTI benchmark is projected to maintain its upward trend due to the ongoing conflict between Russia and Ukraine, with an expected increase of about 4% per barrel. A recent report from the Energy Information Administration (EIA) indicated an unexpected decline in US crude oil inventories, attributed to heightened processing rates and a decrease in gasoline inventories, fuelled by robust demand leading up to the summer driving season.

Meanwhile, in the German market, TEG prices continued to increase in the first half of March 2024, rising by approximately 2.5% due to factors both upstream and downstream. The price of Ethylene Oxide, a key feedstock for TEG, also increased by more than 1.5%, following fluctuations in crude oil prices, which are projected to rise by approximately 3.5% globally. Supply-demand imbalances that emerged from the closure of TEG production plants in the US and Middle East countries between December 2023 and January 2024 have added to the complexities. Additionally, ongoing protests among transport drivers have persisted, reflecting ongoing labour issues, with attempts to expand protests to include cargo and air pilots. Despite these challenges, the German chemical sector saw modest growth, driven by heightened demand and production, supported by stable electricity and gas prices. However, the slight increase in the Consumer Price Index (CPI) from 126.4 in January 2024 to 127.2 in February 2024 signals inflationary pressures on consumers.

Moreover, Ukrainian drone attacks on Russian refining facilities have worsened issues in the crude oil market, and the persistent Red Sea crisis has contributed to fluctuations in shipment freights. Freight from China to North America decreased by roughly 2% during the first half of month, while freight from North Europe to North America dropped by more than 7% compared to the previous month. This decline in freight rates could potentially ease trade tensions and offer some relief for commodities like TEG.

In conclusion, analysts predict that the upward trajectory of TEG prices will continue in the second half of March 2024, given the intricate environment marked by geopolitical uncertainties contributing to volatility in the worldwide crude oil market. The persisting conflict between Russia and Ukraine, along with the ongoing crisis in the Red Sea, continue to exert notable influence on global trade dynamics including TEG.