MEG Prices Drop in Late May 2024 in North America Amid High Inventory and Supply Disruptions

The prices of Mono Ethylene Glycol (MEG) decreased by around 4% in the US during the second half of May 2024. This decline in MEG prices resulted from an oversupply of the material amid supply disruptions. Adverse weather conditions and hurricanes significantly impacted MEG production and transportation throughout the week. Hurricanes affected petroleum and petrochemical markets by disrupting crude oil production and refining operations, especially in the Federal Offshore Gulf of Mexico (GOM). Severe weather posed substantial risks to offshore oil and gas production, leading to evacuations and temporary production halts. Refineries along the Texas and Louisiana Gulf Coast, which account for nearly half of U.S. refining capacity, also faced disruptions from flooding and power outages. These refineries evacuated staff and suspended production for safety reasons.

Additionally, a shortage of ocean containers has disrupted global trade including MEG at the start of the peak season, causing freight rates to surge by approximately 30% in recent weeks. Adverse weather, longer transit times, and vessel diversions exacerbated supply chain challenges. On the 17th of May, Intense thunderstorms in Houston and along the Gulf Coast caused disruptions in the operations of chemical plants, leading to more than 700,000 power failures. These difficulties contributed to MEG prices dropping due to low offtake from the domestic downstream industry amidst high inventory levels. However, during the second last week of the month, despite supply constraints, demand for MEG remained high in the downstream PET manufacturing industry following the reopening of all units. Meanwhile, in the weekly crude oil market, prices continued to decrease, according to the EIA weekly report. On May 24, 2024, the price for West Texas Intermediate crude oil stood at USD 78.48 per barrel, marking a decrease of USD 3.18 from the previous week and an increase of USD 6.13 compared to a year ago. Similarly, the New York Harbor spot price for conventional gasoline decreased to USD 2.503 per gallon, which is USD 0.085 less than a week ago and USD 0.212 less than the price a year ago.

During this period, MEG prices decreased in the Mexican domestic market by around 4.3%, driven by the downward price trend observed in the US MEG market. This decline was particularly influenced by Mexico's significant reliance on imports from the USA for MEG. Moreover, US logistics faced significant disruptions in this period due to various factors. Wildfires in Canada and Greece caused supply chain disruptions, while drought in the Mississippi River Basin reduced barge weight capacity. Additionally, the Panama Canal experienced maintenance work, and the potential strike of the International Longshore and Warehouse Union (ILWU) could further impact trade flows. These disruptions led to increased transit times and reduced cargo capacity, affecting the overall efficiency of the US logistics sector.

Conclusively, analysts anticipate that MEG prices are likely to trend downward in the North American region during the period, driven by high inventory and the refinery operational capacity.