Presented at ICIS PET Value Chain Conference, Amsterdam, 2018
13th March 2018
Prepared by Kami Tang Pack
Senior Consultant, Nexant
Monoethylene
glycol: Analysing
global markets
2ICIS PET Conference 2018 March 2018
Nexant advises clients across the energy and chemicals value chains
▪Understanding market trends: Analysis of recent
factors affecting cost of MEG
▪Is EO cost or PET demand more closely linked to MEG
margins?
▪MEG markets: Capacities and future production – How
will global supply affect Europe?
▪Conclusions
Agenda
3ICIS PET Conference 2018 March 2018
Factors impacting cost of MEG
5ICIS PET Conference 2018 March 2018
Polyester Value Chain
MEG is primarily consumed as a feedstock with co-monomer PTA, in the production of polyethylene terephthalate (PET) resin
para-Xylene
Ethylene
Oxygen
Ethanolamines,
Ethoxylates etc.
PTA
DMT
Ethylene
Oxide
PET Melt
Phase
MEG
DEG & TEG
PET Fibre
PET Bottle
Grade
PET Film
Textile and
Industrial uses
Beverage and
Retail
PackagingRetail
Packaging and
Electronics
Antifreeze
etc.
PU, Gas
Processing
Surfactants,
Pesticides
Global MEG production by process ▪ MEG is mainly produced by hydration
of ethylene oxide (EO).
▪ The hazardous nature of EO restricts
storage and transportation.
▪ Most MEG producers are either back-
integrated into EO or hold long term
offtake agreements with an adjacent EO
supply source.
▪ Process technology for production of
MEG from coal, via an oxalate
intermediate has also been proven, but
as yet only commercialized in China.
The production costs of a typical integrated EO/MEG plant are dominated by the ethylene feedstock costs
6ICIS PET Conference 2018 March 2018
EO hydration
93%
Coal Based
7%
7ICIS PET Conference 2018 March 2018
Ethylene Regional Cost Competitiveness – Q4 2017
Feedstock values shaped regional competitiveness with ethane and coal extending cost advantage over naphtha
-400-200
0200400600800
1000
Chi
naN
apht
ha C
rack
er
Chi
naC
oal t
o O
lefin
s
Chi
naM
etha
nol t
o O
lefin
s
SE
Asi
aN
apht
ha C
rack
er
US
Eth
ane
Cra
cker
W E
urop
eN
apht
ha C
rack
er
ME
AS
TE
than
e C
rack
er
ME
AS
TE
P (
50:5
0) C
rack
er
Dol
lars
per
ton
ethy
lene
Net Feedstock Utilities Fixed Costs Cash Cost
8ICIS PET Conference 2018 March 2018
MEG Regional Cost Competitiveness – Q4 2017
Regional MEG cash cost follow ethylene trends
-400-200
0200400600800
1000
Chi
na In
tegr
ated
Nap
htha
Cra
cker
Chi
na C
oal D
MO
SE
Asi
a In
tegr
ated
Nap
htha
Cra
cker
US
Inte
grat
edE
P (
80:2
0) C
rack
er
W E
urop
e In
tegr
ated
Nap
htha
Cra
cker
ME
AS
T In
tegr
ated
Eth
ane
Cra
cker
ME
AS
T In
tegr
ated
EP
(50
:50)
Cra
cker
Dol
lars
per
ton
ME
G
Net Feedstock Utilities Fixed Costs Cash Cost
MEG margin drivers
10ICIS PET Conference 2018 March 2018
10
30
50
70
90
110
130
-200
0
200
400
600
800
1000
1200
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Bre
nt C
rude
pric
e, $
per
bbl
Cas
h m
argi
n $
per
ton
China purchased ethylene China integrated ethylene China coal via DMO Brent crude
Coal-based MEG margins in China have lost advantage over naphtha in periods of low oil price
11ICIS PET Conference 2018 March 2018
MEG margins are largely driven by supply/ demand in PET markets
64%
66%
68%
70%
72%
74%
76%
78%
80%
82%
-200
0
200
400
600
800
1000
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Glo
bal P
ET
Mel
t Pha
se O
R, %
$ pe
r to
n
China integrated ethylene PET MP Operating rate
12ICIS PET Conference 2018 March 2018
Polyester Chain Cash Margin – Western Europe (Leader Plant)
Profitability is now in the refinery and PX part of the chain value chain
-500
0
500
1000
1500
2000
250019
9019
9119
9219
9319
9419
9519
9619
9719
9819
9920
0020
0120
0220
0320
0420
0520
0620
0720
0820
0920
1020
1120
1220
1320
1420
1520
1620
17*
US
$/to
n
PET Margin PTA Margin MEG Margin PX Margin Xylenes Margin Reformate Margin
13ICIS PET Conference 2018 March 2018
▪New entrants into PTA such as the affiliates of the
Rongsheng and Hengli groups demonstrated their
ability to finance and execute capacity developments of
unprecedented scale.
▪Now applying these abilities to PX, investing tens of
billions of dollars in new world-scale oil refineries, will
aromatics capacity well beyond any previous projects
anywhere in the world.
New projects aiming to capture margin higher in the value chain
MEG Markets
Regional MEG Demand, 2017-e
(volume = 28.3 million tons)
Regional MEG Demand Growth
(percent Volume Growth)
MEG consumption growth soared to 7.4 percent in 2017
15ICIS PET Conference 2018 March 2018
-10 0 10 20
Western Europe
North America
Eastern Europe
South America
Global Average
Asia Pacific
Middle East
Central Europe
Africa
2016-2025 2000-2016
Asia Pacific80%
North America
9%
Western Europe
5%
Middle East3%
MEG Demand by Derivative, 2017-2025
(Million tons)
MEG Demand Growth by Derivative
(percent Volume Growth)
The concentration of the PET industry in Asia Pacific has supported high growth rates for MEG
16ICIS PET Conference 2018 March 2018
0
10000
20000
30000
40000
50000
2017 2025
PET MeltPhase
Antifreeze
3.9%
28.3
million
38.4
million
-2 0 2 4 6 8
Antifreeze
Industrial
Global Average
PET Melt Phase
2017-2025 2000-2017
17ICIS PET Conference 2018 March 2018
Global MEG Capacity Additions by Region, 2015-2020
(Million tons)
Chinese coal-based capacity growth slowed in 2017 but is set to revive over 2018-2020. Four new EO/MEG plants expected in the US
-1.0
0.0
1.0
2.0
3.0
2015 2016 2017 2018 2019 2020
North America South America Western Europe Central Europe
Eastern Europe Middle East Africa Asia Pacific
18ICIS PET Conference 2018 March 2018
China MEG Supply, Demand and Trade
Chinese fibre production growth reached the highest level for several years, causing a significant increase in operating rates for MEG
0%
20%
40%
60%
80%
100%
0
5000
10000
15000
20000
25000
30000
2 000 2 005 2 010 2 015 2 020 2 025 2 030
Op
erating
Rate, %
Th
ou
san
d t
on
s
Production Consumption Capacity Operating Rate
March 2018ICIS PET Conference 2018 19
Decreased import requirement in China left more ME material available to ship to Europe in 2017
WE MEG Supply, Demand and Trade
0%
20%
40%
60%
80%
100%
0
500
1000
1500
2000
2 000 2 005 2 010 2 015 2 020 2 025 2 030
Op
erating
Rate, %
Th
ou
san
d t
on
s
Production Consumption Capacity Operating Rate
20ICIS PET Conference 2018 March 2018
Key Mono-Ethylene Glycol Grade Trade Flows (2017 and 2030 F)
Middle East exports to Asia are by far the largest volume
2017 2030
2017 2030
2017 2030
20302017
2017 2030
NA
SA
WE
Asia
ME
2017
2030
Conclusions
22ICIS PET Conference 2018 March 2018
(1) Recent factors impacting cost of MEG
▪Ethylene is the cost driver
▪Oil price impacts relative regional competitiveness
(2) MEG margins
▪History has shown that MEG margins are influenced by PET
supply demand dynamics vs feedstock cost
(3) MEG Capacity development impact on Europe
▪More capacity will exit in WE due to limited downstream
investments
▪A new plant is not impossible in the longer term, but does not
currently appear likely
Conclusions
Nexant, Inc.
San Francisco
New York
Houston
Washington
London
Bahrain
Bangkok
Shanghai
Kuala Lumpur
www.nexant.com
1 King’s Arms Yard,
London, EC2R 7AF
Telephone: +44 20 7950 1600
Facsimile: +44 20 7950 1550
www.nexant.com
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presentation, the information contained herein was prepared on the basis of information that is publicly available and has
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