Bea:
Hello, and welcome to this episode of "Chemical Conversations", a podcast brought to you by Argus Media where we dive into the latest trends, insights, and developments in the global chemical markets.
Today, we’re zooming in on the European markets for MEG, PX/PTA and PET three critical components in the production of plastics, textiles, and even antifreeze. These markets are key to understanding the broader landscape of the chemical industry.
Now, all three of these chemicals are essential to a wide range of industries: from packaging, automotive, textiles, to electronics. They form the backbone of many consumer products we interact with daily. So, understanding the dynamics of these markets is crucial for anyone involved in manufacturing, sourcing, or investing in the chemicals and plastics sectors.
I am your host today, Beatrice O’Kelly, commercial product manager at Argus Media, and I am joined by our chemicals market experts- global editor of PET, Chloe Kinner, deputy editor of MEG, Liana Minihan, and chemicals editor, Qamreen Parker.
We’re going to start off by taking a closer look at the current state of these markets in Europe, starting upstream with MEG. Europe is a significant producer and consumer of MEG, but the market is heavily dependent on imports from other regions, especially the Middle East and the US.
Liana- as the MEG deputy editor- can you give us an update on the MEG market in Europe?
Liana:
Spot prices for MEG have been slowly softening in Europe since early November when Argus launched its EO & Derivatives service, which covers MEG among other products. This gradual price drop has been demand-driven, as spot buying for PET production slowed in November, while demand for antifreeze and coolant uses was not strong enough to support prices.
In terms of availability, we haven’t seen any major changes in European supply recently, despite production outages in a key producing country and ongoing logistical disruptions in the Red Sea.
Europe is a net importer of MEG and relies on imports in addition to its domestic production. This is partly because European producers tend to minimize MEG output because of thin margins and favour the production of EO derivatives with higher added value.
The US and Saudi Arabia are key suppliers of MEG to Europe.
In the US, the MEG market balance tightened in the third quarter because of multiple plant outages, with production dropping by 12pc on the year. Imports to Europe were not affected by the supply squeeze, as inventories were sufficient to meet contractual commitments. But spot availability was scarce, and we haven’t seen any significant increase in shipments to Europe despite the arbitrage being open in September and early October.
Saudi producers continue to ship MEG to Europe, despite ongoing Red Sea disruptions triggered by militants' attacks on ships that started late in 2023. Higher freight rates put pressure on netbacks, but deliveries to Europe were only 8pc down so far this year.
Bea: Thanks Liana. Moving on to another feedstock of PET- PTA. PTA production is highly concentrated to a few countries, with Asia where the dominant suppliers are, namely China. However, Europe does have some production facilities, in Belgium, Poland and Spain.
Qamreen- what’s the update on the PTA market in Europe- are you seeing similar trends to what we’re seeing in the MEG market?
Qamreen:
The PTA market in Europe, like MEG, is impacted by fluctuations in regional feedstock costs and freight costs impacting imports. European MX which is isomerised to PX, the feedstock for PTA, is priced at a premium to European gasoline. In Asia, PX and thus PTA pricing is linked to cheaper naphtha.
As a highly global market, PTA is relatively easily transported across the world. When freight rates are low, and Asian prices are significantly cheaper than European produced material, we see significant imports landing in the ARA region which can stifle domestic production at times.
Due to this, in the last 18 months, we’ve seen consolidation in the western PTA sector, with large global players deciding to cut their production capacities, for example in Europe (with Portugal and the Netherlands) and Canada. Indorama is a company that has mothballed two PTA plants in Europe, one integrated to PET that they also shuttered. They were able to do this by drawing on production sites in Asia that can run with better margins.
Europe is dependent on PTA imports for regional PET production, and unlike MEG, has no large secondary demand pool. Thus, PTA producers in Europe will continue to closely watch PET imports and utilisation rates for domestic producers.
Bea:
Right, and that’s a great segue into PET. Chloe, can you give us an update on the European PET market, and the development of recycled markets?
CHLOE TO EDIT
Europe remains one of the largest consumers of PET, especially in the beverage and food packaging sectors, but market conditions in Europe have been challenging this year just as we have heard for the MEG and PX/PTA markets.
The European PET sector is experiencing the impact of flat demand levels, high production costs, and the increasing flow of imports. Production capacity is limited in Europe, and as Liana and Qam mentioned the region is reliant on feedstock imports as well, meaning the sector can be susceptible to global price volatility and global geopolitical uncertainties.
Earlier this year antidumping duties were imposed on PET imports from China to support the European domestic industry, however lower cost imports from other countries have continued to put pressure on the European market.
European PET resin spot prices weakened since the peak consumption time over the summer, as European sellers competed with lower cost imports and demand softened.
Prices have bottomed out in the last few weeks and have now stabilised.
The expectation is that prices will remain relatively steady through to the end of the year and into the early new year. There is some speculation that if supply tightens because of the current force majeure in place at one producer and planned maintenance over the period that prices could creep up, but no significant movements are expected.
Bea:
Thanks Chloe. And Finally, let’s look ahead to the future of the European MEG, PET, and PTA markets. What trends should we expect to see in 2025 – lets start with the feedstocks, Liana?
Liana: We expect tighter supply of MEG in Europe in the first quarter of 2025 that would likely lead to firmer spot prices in February-March. Operating rates at European plants are likely to be broadly stable, but imports frothe US are expected to be reduced, as multiple overlapping turnarounds are set to tighten supply.
Some market participants also expect an uptick in buying for the antifreeze sector early in the first quarter, which should support prices. That said, the PET sector could take less MEG if the current force majeure at one of the producers lasts well into the first quarter.
What are you seeing on PTA, Qam? Similarly tight supply?
Qam: Yes, the market is expected to remain tight in Europe for the next year, with only those three producers operating in the region. But as I mentioned before we will closely be watching imports – should more PTA imports flood the European market than needed – domestic operators could be forced to cut rates. The market also awaits clarity on INEOS’s Belgian operations, where regulatory disputes are ongoing regarding the plant’s wastewater cobalt limits.
Bea: thanks both. And moving onto PET- what can we expect in the next 12 months, Chloe? And particularly for recycled Pet?
CHLOE TO EDIT:
For virgin PET in Europe the outlook in remains a little cautious for next year.
End use demand for packaging is forecast to be relatively flat, with an optimistic outlook anticipating 2-3pc growth at best. Others expect that demand could remain flat and consumer spending continued to be hampered by inflation and wider economic factors.
European producers main concern is striving to remain competitive on a world scale with higher fixed costs in Europe such as the cost of electricity and increasing volumes of lower cost imports.
One other key trend we’re seeing is the growing emphasis on sustainability and circular economy initiatives and we cover these markets in our recycled polymers service.
The European Union has set ambitious collection and recycled content targets in the Single Use Plastics Directive from 1 January, which has supported demand for recycled PET (rPET). There's an increased focus on the circular economy, with both governments and companies striving for higher recycling rates.
Brands and manufacturers are committing to higher recycled content rates above regulatory goals and are aiming to use more sustainable materials. We’re also seeing investments in new technologies, like chemical recycling, which could help improve the availability and quality of recycled materials in the future.
Bea: Brilliant thanks very much Chloe. To the listeners Thanks for tuning in today! It’s an exciting time for Argus’ chemicals coverage, have just launched a weekly EO & Derivates price report which Liana edits, and we already cover several PX, PTA, PET and recycled polymer prices. We have plans to expand on this coverage in the new year with a dedicated PET & Polyester report- and if you have any questions or enquiries on any of this- or on this pod episode- please do get in touch via chemicals@argusmedia.com.
Thanks everyone, and thank you Liana, Qam and Chloe for your time today!
