Buyers see little pricing change through 2001
Staff -- Purchasing, 5/3/2001 2:00:00 AM
Prices: flat, may slide in fourth quarter
Some chemical market analysts see ethylene glycol prices rising somewhat beyond April, but according to Purchasing's monthly chemical price survey, glycol buyers expect prices for industrial-grade material to hold steady for the next six months before softening slightly during fourth quarter 2001. Fourth-quarter glycol prices are forecast to average 32¢/lb for contracts and about 34¢/lb on the spot market.
Some industry sources are not ruling out a price spike during mid-summer, caused by rising demand for antifreeze and severely tightened supply. However, this will also depend upon summer economic conditions and buyers' confidence in the second half of the year.
Working against the possibility of a price spike, however, is the fact that significant capacity is scheduled to come on line this year from plant expansions around the world. Ethylene glycol supply may get tight in the short term, but further out, a long supply situation and a stable-to-sliding price scheme is likely.
Demand: should pick up near term
Annual demand for ethylene glycol is fairly steady, though the market usually gets a seasonal demand boost during the spring and summer months. How much of a demand boost depends largely upon the performance of the overall economy.
Affecting the supply/demand balance is the fact that many buyers built sizable inventories during late 2000 and early 2001 in anticipation of higher prices this year. As a result, demand for glycol from buyers and buying activity has waned in recent months.
Domestic consumption of ethylene glycol is expected to exceed 5.7 billion lb/yr in 2001. Compare this to last year's glycol consumption of 5.09 billion lb/yr, according to data from Houston, Texas-based industrial and petrochemical research firm The Pace Consultants Inc.
Supply: tightening with expansions pending
With weaker demand and a slowing economy, producers continue to cut back their production of ethylene glycol. On an annual basis, domestic producers are expected to produce about 5.63 billion lb of glycol in 2001, which is about 232 million lb less than last year's total annual production, according to Pace.
And in the past three months, ethylene glycol producers have throttled back production to below 70% from an average operating rate of about 80% in October and November 2000. Pace expects producers' average operating rate for glycol production to fall below 69%.
"Significant capacity has come off in recent months and both producers and buyers are bleeding off their inventories," says an analyst at Chemical Market Associates Inc., an industrial market research firm located in Houston, Texas. "The longer assets stay down in the market, the tighter supply is going to get," he says.
And while suppliers are doing what they can to tighten the market by scheduling plant maintenance turnarounds and by shifting their investment (where possible) toward naptha-based production, significant ethylene glycol capacity is scheduled to come on line during the next 18 months.
Companies with capacity expansions planned include the Nova Chemical/Union Carbide Corp. joint venture located in Joffre, Alberta, and Shell Chemical's ethylene and polyethylene plant in Geismar, La. In addition, large material capacity expansions are under way at SABIC 's plant in Saudi Arabia and at glycol producers in Korea and China.
Market: mature
The production of antifreeze makes up slightly more than 33% of global ethylene glycol demand. Secondary ethylene glycol end-use markets include the production of polyester films and fibers, used primarily in textile manufacturing, and bottle-grade polyethylene terephthalate (PET), an important packaging material in the food and beverage markets. Other uses, such as unsaturated PET resins, deicing fluids, solvents and surface coatings, claim a smaller share of the global glycol market.
Ethylene glycol end uses
| End use | (% of market) |
| Antifreeze | 36 |
| Polyester fibers | 26 |
| Polyethylene terephthalate (PET) | 21 |
| Solvents and other industrial uses | 17 |
| Source: PURCHASING |
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