Global ethylene glycol prices are expected to face further downward pressure in the first half of the year due to the global economic recession. However, market participants said the potential for a sharp fall in prices was still limited, as weak margins could prompt less cost-competitive ethylene glycol producers to cut utilisation rates. Several new ethylene glycol plants, especially coal-based ethylene glycol plants, do not yet have a specific date for production.
Some sellers say there is growing uncertainty that a new ethylene glycol plant delayed in 2020 will be able to open in the first half of 2021. Downstream producers say about 30-40 per cent of downstream industry is for export and that demand alone cannot support new ethylene glycol capacity growth.
Slowing downstream demand in the textile industry will result in a glut of ethylene glycol supply of 1 MMtpa in 2021, and ethylene glycol suppliers need to consider reducing production load rates to maintain balance.
American exports are up
Some market participants are also concerned that even if crude oil prices recover in the first half of 2021, ethylene glycol prices will remain under pressure given high supplies, particularly from the US. Sources said they are closely watching potential changes in bilateral trade flows between the US and China, and that there should be new regulatory measures in the US after the election. China remains by far the largest importer of ethylene glycol from the US, according to the US International Trade Commission. In the first nine months of 2020, China has imported 608,564 tons of ethylene glycol from the US, more than four times the amount in 2019.
Factories shut down and scheduled for repairs due to the storm resumed operations in late October, and U.S. ethylene glycol exports also began to recover, traders said. The U.S. glycol oversupply is expected to continue through the first half of 2021. Traders said the US will also add capacity and expand ethylene glycol exports across the board in the first half of 2021, some of which will be exported to Asia.
China Taiwan Nanya's new 800, 000 tpa ethylene glycol plant at Point Comfort, Texas, also started production in December 2020, earlier than originally expected, market participants said. ExxonMobil and Saudi Basic Industries Corp. (SABIC) will also begin production of their new 1.1 MMtpy ethylene glycol plant at their joint venture petrochemical plant near Corpus Christi, Texas, USA, in the fourth quarter of 2021.
The European market is in flux
In Europe, the progress of the anti-dumping investigation launched by the European Commission on October 15 against imports of ethylene glycol from the US and Saudi Arabia remains a key concern for market participants. The European Committee for the Defence of Ethylene Glycol Producers had earlier lodged a complaint alleging that ethylene glycol from the US and Saudi Arabia was being dumped in Europe at prices below their origin, affecting European producers' sales volumes, pricing and market share.
Pending the outcome of the investigation, market participants said they were holding off on signing a supply contract for ethylene glycol for 2021. Negotiations on futures contracts have also been held up by potential additional tariffs and a lack of clarity about who should bear the extra costs, according to one European supplier. Any action by the commission against US and Saudi exports could lead to changes in global ethylene glycol trade flows if European consumers start to seek supplies without additional import duties.
According to the latest Eurostat data, EU imports of ethylene glycol (MEG) from the US fell 19 per cent to 601,000 tonnes by 2020, while imports of glycol cargo from Saudi Arabia to the EU fell 52 per cent to 753,000 tonnes.
