MEG Continues to Be Short of Supply

By John Zheng

Rapid production development

China has 12 mono ethylene glycol (MEG) producers today with a
total capacity of 1.698 million t/a. The production process used
by all the producers is the ethylene oxide direct oxidation
process. The MEG production has developed rapidly in recent
years. The 300 thousand t/a MEG unit constructed by BASF-YPC Co.,
Ltd. was completed and put on stream in Nanjing, Jiangsu province
in 2005. (CCR2005, No. 20) The 320 thousand t/a MEG unit
constructed by CNOOC Shell Petrochemical Co., Ltd. started
production in February 2006.

Constant import growth

With the rapid development of the polyester industry in China
in recent years, the consumption of MEG has increased constantly.
The output of MEG in China was 1.1008 million tons in 2005, the
net import amount was 3.9875 million tons and the apparent
consumption reached 5.0883 million tons, an increase of 17.94%
over 2004. In spite of the constant increase in both the capacity
and the output of MEG in recent years, owing to the rapid
development of downstream sectors such as the polyester sector
the output of MEG still can not meet the domestic demand. Import
has to be made in great quantities each year and the import amount
has increased constantly. MEG is in great supply deficit in China
today. Several MEG projects will be constructed or expanded in
the next few years. These projects include a 380 thousand t/a
unit in Sinopec Shanghai Petrochemical Company Ltd. (started
construction in 2005),(CCR 2005, No.5) a 140 thousand t/a
expansion project in CNPC Liaoyang Petrochemical Co., Ltd. (to
start production in 2007), a 140 thousand t/a expansion project
in Sinopec Yangzi Petrochemical Co., Ltd.(to start production
in 2007), a 600 thousand t/a unit in Sinopec Zhenhai Refining
& Chemical Co., Ltd. (to start production in 2009), a 120
thousand t/a unit in Ningbo Concord Petrochemical (to be
defined), a 200 thousand t/a unit in Taicang, Jiangsu province
(to be defined), a 200 thousand t/a unit in Xinjiang (to be
defined) and a 300 thousand t/a unit in Tianjin Ethylene Project
of Dow Chemical (to be defined). If all these construction and
expansion plans can be executed, the capacity of MEG in China
will reach 4.3 million t/a in 2010.

Huge market deficit

MEG in China is mainly used in the production of polyester,
antifreeze fluids, adhesives, paint solvents, cold-resistant
lube oils, surfactants and polyester polyols. Polyester is the
major consumption sector for MEG in China. The production of
polyester (including polyester fiber, polyester resin and film)
has developed rapidly in China in recent years. The capacity of
polyester reached 21.5 million t/a in 2005, an increase of 30%
over 2004. Major polyester producers in China include Jiangsu
Yizheng Chemical Fiber Co., Ltd., Zhejiang Yuandong Chemical
Fiber Group, CNPC Liaoyang Petrochemical Co., Ltd., Sinopec
Shanghai Petrochemical Company Ltd., Zhejiang Hengyi Group Co.,
Ltd., Xiamen Xianglu Chemical Fiber Co., Ltd., Guangdong Kaiping
Polyester Enterprises Group Co., Ltd. and Jinan Zhenghao
Advanced Fiber Co., Ltd. The output of polyester in China was
around 13.9 million tons in 2005 and around 4.87 million tons
of MEG was consumed, accounting for 95.7% of the national total.
It is expected that the output of polyester in China will reach
19.0 million tons in 2010 and the demand of MEG in polyester
production will be 6.46 million tons. When the consumption in
antifreeze fluids and other sectors is added, the total demand
of MEG in China is expected to reach around 6.8 million tons in
2010. The capacity of MEG in China will be 4.3 million t/a in
2010. Even if all the units are operating at full load, the market
demand still can not be satisfied.
   Around 95% of MEG in China is used in the polyester production.
In case the polyester production has problems, the MEG sector
will be seriously affected. It is therefore imperative for China
to make application development of MEG in other sectors and
change the situation of unitary application to mitigate future
market risks.
   In spite of the great market deficit, domestic MEG producers
will be faced with competition from great quantities of
low-price products produced by the Middle East through the
ethane process and also products from other countries and
regions such as Taiwan province and Malaysia.

Major MEG Producers in China in 2006
                                       (thousand t/a)
Producer                                                      
Capacity
Sinopec Beijing Yanhua Petrochemical Co.    80
CNPC Liaoyang Petrochemical Co.             60
CNPC Fushun Petrochemical Co.               60
CNPC Jilin Petrochemical Co.                159
Beijing Eastern Petrochemical Co.           40
Sionpec Yangzi Petrochemical Co.            262
Sinopec Shanghai Petrochemical Co.          225
Sinpec Maoming Petrochemical Co.            100
Tianjin United Chemical Co.                  42
CNPC Xinjiang Dushanzi Petrochemical Co.    50
BASF-YPC Co.                                300
CNOOC Shell Petrochemical Co.               320
Source: CNCIC Chemdata