Global MEG demand growth estimated at 4-5%

Global demand for monoethylene glycol (MEG) is likely to increase 1.1-1.2 mln mt or 4-5% this year, as per an MEGlobal official quoted by Platts. Ringo Leung, vice president for commercial and supply chain for the major Dubai-based producer, said 2015 global demand was an estimated 25.7 mln mt, with China accounting for 12.85 mln mt or half of it. MEGlobal markets over 2.5 mln mt/year of MEG. Major consumer markets such as India and China -- where factories still require significant amounts of MEG feedstock to produce polyester fibers and PET resins -- will continue to be the main drivers of growth, Leung said. Even though China's exports of polyester end-products have fallen, Leung said it is still possible for the country's MEG demand to rise 6% this year. He said the country still makes most of the fabrics that garment manufacturers require. Chinese polyester fiber and PET resin production operating rates averaged 73%-76% of capacity in 2015, he said. Kamlesh Parwani, MEGlobal's commercial director for Europe, Middle East, India, Pakistan, said during the same interview that besides China, the regions with the most potential for growth are India, North America and Europe. Indian MEG demand is likely to grow more than 7% in 2016, based on an assumption that the country's GDP grows faster than the 7.5% rate projected by the International Monetary Fund. He added that "In terms of polyester, global growth is likely to be around 5%, while we anticipate Indian polyester demand to grow over 7%." Outside of Asia, the company is starting to see recovery in Europe and America. New MEG capacity additions in Europe and low crude oil prices are expected to support demand in Europe and North America by about 2%. North America's 2015 MEG demand was estimated at 3.1 mln mt, with Europe's at 2.1 mln mt. "I'm more optimistic about Europe in 2016 and 2017 compared to the past few years, boosted by more monetary and quantitative easing and the competitive euro currency," Leung said. Leung said sustained weak crude oil prices could support MEG demand by keeping production costs low. That combined with tighter supply could lead to a market recovery. Few conventional naphtha or natural gas-based production facilities are expected to come on stream this year. "For 2016, supply and demand fundamentals are very healthy," he said. Parwani said only the 500,000 m tpa Iranian MEG plant at Morvarid will start in late February, while India's Reliance Industries will likely start its new 750,000 m tpa MEG plant at Jamnagar, Gujarat, in early 2017. "Furthermore, non-conventional coal-based sources of MEG supply will remain unstable and uncompetitive given the current low crude prices," he said. Leung expects MEG prices to remain volatile in the short term because of fluctuations in crude futures, the US/yuan exchange rate and yuan-traded MEG futures on the Huaxicun Commodity Exchange. But he said the MEG market has shown relatively more supply/demand balance than oil markets, which have plunged more than 70% since mid-2014 to the US$30s/b recently. The CFR China MEG marker has dropped around 38% from US$990/mt in mid-2014 to US$600-620/mt.