The global demand for Ethylene Glycol (EG) is on a constant upward trajectory, in the coming few years. The growth in the ethylene glycol market continues to be influenced by robust demand for polyester fibers and PET resins. North America and APAC regions are projecting a considerable growth in the EG market, growing with an exponential CAGR.
Ethylene glycol is a key ingredient for the production of PET bottles that are used for containing carbonated drinks and water. A rise in disposable incomes has spearheaded the global demand for PET bottles. This has further fuelled the demand for ethylene glycol and ethylene oxide since the past decade.
The Chemistry of Ethylene Glycol and Insights on its Production
Earlier, ethylene glycol was manufactured by hydrolyzing ethylene oxide (EO) that was produced using ethylene chlorohydrin. Today the manufacturing process uses a direct oxidation method.
First, the EO is produced by the oxidizing ethylene in the presence of oxygen and a silver oxide catalyst. Then a crude ethylene glycol mixture is produced by the hydrolysis of ethylene oxide under pressure, using water. Further, through fractional distillation of EG in the vacuum, the manufacturing of MEG or monoethylene glycol takes place. Thus, ethylene is an essential component for producing ethylene glycol.
To produce ethylene commercially, the steam cracking of a range of hydrocarbon feedstocks is done. In the Middle East, U.S. and Canada, the cracking of ethane and propane take place that helps them to produce only ethylene and propylene. Thus, their plants are relatively cheaper to construct and easy to operate.
Petrochemicals or petroleum distillates are the chemicals that are extracted from petroleum. The petrochemicals are bifurcated into two classes called the olefins and aromatics. The olefins include ethylene and propylene and the aromatics include isomers of benzene, toluene, and xylene.
Ethylene is the simplest olefin and also one of the most widely produced chemicals in the world. It forms a common link between the ethylene glycol and the petrochemical industry and the production and price of ethylene impacts both the industries considerably. Before understanding the correlation between EG price rise and the petrochemicals market, here is an insight into the global situation.
The Global Petrochemical Market Scenario
The global petrochemical industry is currently undergoing a period of transition. The largest petrochemical industries are in the U.S. and Western Europe, although in terms of new production capacity growth, Asia and the Middle East are the two regions of development. China was the fastest growing market in this industry, but their GDP rate has started to fall slowly.
If we look towards 2030, a slow-paced growth in the demand from the emerging economies is anticipated. The main constraint that has been identified is the depleting availability of the advantaged feedstocks, which is directly curbing the petrochemicals market growth in the future.
The Impact of EG Price Rise on the Petrochemical Industry:
There are three main olefins feedstocks namely ethane, propane and light naphtha. Other feedstocks include light crude oil, butane, natural gasoline etc. Thus, the crude oil prices are directly proportional to light naphtha and propane prices. Since the local producers of ethylene and polyethylene tend to use light naphtha as feedstocks, the prices for ethylene and polyethylene also depend on the crude oil prices. Since the U.S market has surplus ethane feedstock at a cheaper price, it produces high valued ethylene and polyethylene feedstocks. Thus, the U.S. market benefit with the rising crude oil prices directly.
However, the feedstock advantage is anticipated to erode slowly in the next ten years owing to new ethylene cracking capacity and increasing export opportunities. This, in turn, will increase ethane and propane demand and drive prices up. The high prices for ethane and propane will dial up the prices for ethylene as well.
The industries where there is a major requirement for ethylene in manufacturing processes, such as the ethylene glycol industry, a direct impact on the global prices and supply will exist. According to the ethylene glycol price trend analysis, ethylene oxide is the major cost component in the production of EG, which is directly dependent upon ethylene and naphtha prices. To put it simply the rising prices of ethylene glycol will amount to an increase in the price of ethylene or vice versa, which in turn will affect the petrochemical industry, that substantially depends on olefins feedstock.
Because of this changing scenario, the price dependency of the petrochemical industry on the ethylene glycol market has landed investors in a tight spot. A steeper price curve in the petrochemicals industry would mean greater volatility and oscillating demand-supply trends.
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