Published October 2016
Within the Ethylene Glycols product group, Monoethylene Glycol (MEG) is by far the largest-volume product, accounting for more than 90% of the overall Ethylene Glycols market. MEG is consumed primarily in the production of polyester (Polyethylene Terephthalate [PET]), which is subsequently used for the production of fibers, films, solid-state resins and other consumables. Polyester/PET applications commanded 84% of global MEG consumption in 2015. Overall, consumption of Ethylene Glycols is broadly tied to the general economy and has been increasingly linked to emerging economies, where the improvement in living standards is driving an increasing use of packaging, films and textile fibers, as well as an increasing number of vehicles (antifreeze).
The following pie chart shows world consumption of monoethylene glycol:
Like all other petrochemical markets, the Ethylene Glycols market is cyclical, with the equilibrium between supply and demand driving the state of the industry. In times of large concomitant new capacity commissioning, operating rates generally decline and margins shrink because of increased competition among producers. As margins remain under pressure, no new capacity construction is undertaken (trough conditions). As demand gradually catches up with production, operating rates firm up and margins expand (peak conditions). This is when the next wave of capacity is generally planned (and so on).
Peak conditions were prominent within the Ethylene Glycols industry between 2012 and 2014. But the industry is currently facing five years of oversupply, which will inevitably drive operating rates down. These conditions will be related to new capacity increasing faster than the demand itself. The slowdown in MEG demand growth will also further exacerbate the supply glut seen in the industry.
One of the recent game changers within the MEG-producing landscape has been the gradual emergence of the newer Coal-To-MEG (CTM) routes. These technologies have been developed in China, where the country is capitalizing on the abundance of its coal resources to produce chemicals. Nevertheless, the operating rates of CTM plants are still quite low comparatively, as these units are still struggling with issues of product quality and process reliability.
From a regional standpoint, Northeast Asia has become the dominant MEG consumer globally, accounting for 63% of the 2015 demand. Within this region, China is by far the largest consumer, with 84% of regional consumption in 2015, China alone accounted for about half of the MEG consumption globally. The growing textile industry in China has been a key driver for the increasing demand for polyester fibers. Most Chinese MEG consumption growth has been driven by the increasing production of PET polymer, Chinese PET capacity has grown at a sustained rate of 14.5% per year over the past 15 years.
The rapid growth of the PET market (solid-state polyester resin, polyester fibers, polyester film) has triggered a rapid rise in MEG consumption and new capacities have been opened to serve this growing market. The share of MEG used to produce PET has grown significantly over the past three decades, while PET represented just a little over 2% of the MEG market 30 years ago, it has now reached a level of more than 84%. This market is expected to increase at an average rate of 4.2% per year through the forecast period.
Since 2000, consumption of Ethylene Glycols has grown at a rate of 5–6% per year on average. Over the next five years, consumption is expected to increase further, albeit at a more moderate rate (4% per year on average), primarily because of softer economic growth prospects in China.