The global MEG market is now observing the third consecutive year of more than 10% nameplate capacity growth, marking an increase of 5.5 million metric tons (mt) or 11.4% over 2021. In the past three years, MEG capacity additions recorded unprecedented growth, totaling over 16 million mt across the world – almost four times higher than global demand growth during the same period.  Apart from the implementation of extensive and prolonged production cutbacks in those traditional “high-cost” regions, increasing on-purpose production cutbacks emerged even in “cost-advantaged” regions amid intensive economic pressure and market difficulties.

Chemical Market Analytics expects that as much as 8 million mt of additional MEG capacity will start commercial production by the end of 2023. While more than 90% of these capacity additions are located in mainland China, nearly 50% are based on conventional processes integrated to ethylene crackers and the remainder are based on coal as a feedstock. Beyond these, Chemical Market Analytics forecasts that there will be a dramatic slowdown in new MEG capacity additions through 2026-2027 when the next wave of ethylene cracker projects is completed mainly in mainland China, suggesting a possible gradual recovery in industry margins post 2023.The impact of mainland China’s economic slowdown was felt in the domestic mainland Chinese market where downstream polyester production recorded exceptional negative growth in the first three quarters of 2022. Chemical Market Analytics forecasts that global MEG demand growth will be moderated to less than 2% in 2022 from an amazing 8.5% level seen last year, translating to far less than one million mt of incremental MEG consumption year on year. Consequently, the gap between global nameplate MEG capacity and demand have widened dramatically.

As a result, several million mt of MEG capacity which are still operating this year will have to close to maintain theoretical global balance. In the first three quarters of 2022, except for the low-cost regions where producers have access to cost advantaged ethane, the remaining players that rely on other feedstocks including naphtha, merchant ethylene, methanol and coal mostly suffered miserable or negative margins. Undoubtedly, this high-cost capacity will be more vulnerable to the potential large-scale rationalization required over the next 12-18 months. Considering the level of excess capacity, intense competition will take place between integrated naphtha-based and coal-based producers.  With mainland China’s self-sufficiency rising rapidly and other major growing markets like India also dedicated to expanding their own production capability, the low-cost regions which are usually major exporters in the global MEG stage are also facing increasing challenges to find a home for their production, probably resulting in production cutbacks in those regions as well.

Chemical Market Analytics’ Aromatics & Fibres’ team will also be speaking at the Asia Chemical Forum on the November 3 – 4, 2022 in Singapore. Find out more and register now.

Alan Lu
Executive Director, Aromatics and Ethylene Glycols
Chemical Market Analytics by OPIS, a Dow Jones Company