MEG: Global Overcapacity, Regional Tightness - For How Long?

Everything that happened in 2020 was impossible to imagine, as is the current situation in the petrochemical industry, and glycols are no exception. It is obvious that the pandemic affected directly the cost and demand for MEG, but countless supply-related factors are needed to understand the current global and regional markets for glycol.

Considering the start of multiple new glycol units in 2018-2021 and a clear global overcapacity, it was not easy to forecast that there could be a shortage of MEG to operate PET units in the US and Europe. This is the case at present and the main uncertainty, in addition to guaranteeing material to operate, is when the market will normalize and what will be the effect on prices and margins.

The chart shows the capacity increase in recent years, with more than 10 million tons of new production in the period 2017-2020, and a similar additional figure ready to operate in the next 24 months. Despite a relatively good demand, the market was driven by a clear and huge overcapacity, the effects of which were observed from Q4 2018 onwards, when producers suffered from low glycol prices and shrinking margins regardless of the feedstock used. Since them, different factors have limited supply for different reasons at different times tightening all regional markets.

The impact is discussed in greater detail in the full article.