Ethylene glycol shortage panic eases as demand weakens

Global MEG markets are shifting from geopolitical risk premium to demand-led correction. After nearly three months of Strait of Hormuz disruption, MEG and related products have moved from a sharp supply-driven rally to a broad retreat, as weak demand and falling feedstock costs reduced the urgency of shortage concerns.

As costs moved lower, some nearby MEG units began preparing for restarts, including Petronas' 380 kt/year unit in early June, Nan Ya's 360 kt/year unit on Jun 1, and Lotte's two 120 kt/year units in the near term. The combined capacity involved is 980 kt/year.

In China, lower ethylene prices have reportedly encouraged a major South China producer to consider restarting EVA and EB units using purchased ethylene. However, MEG margins remain weak compared with other ethylene derivatives, so the restart timing for its MEG unit is still unclear. Separately, weak EO sales have pushed some domestic EO/EG co-production units to shift output toward MEG, adding around 20,000-30,000 mt/month of potential MEG supply.

Overall, while Persian Gulf MEG supply has not yet seen a substantive recovery, the global shortage narrative has weakened. Demand destruction, lower feedstock costs and gradual restarts outside the Gulf are partially offsetting the loss of deep-sea supply. The panic shortage phase appears to have passed, but whether the market faces a renewed supply gap will depend on US-Iran developments and the strength of downstream demand.