Volatility has been seen in pricing of polyester feedstock monoethylene glycol, with unclear prospects amid tight supply caused by plant turnarounds while demand has been weak. This is a turbulent time for monoethylene glycol (MEG), as per ICB in ICIS. At the start of the year there were expectations of too much supply. In March, Asian MEG prices were expected to fall after a long uptrend due to ample supply. Sentiment was bearish, compelling several producers to announce a number of planned turnarounds that has resulted in increased market tightness, with worries that there will not be enough product to satisfy growing demand. SABIC plans to shut 8 major MEG units in Saudi Arabia this year – 6 in the first half, and 2 in the fourth quarter to avoid high temperatures during the summer. SABIC is the world's largest MEG producer, with a total capacity of 5.71 mln tpa. In late April, Rabigh Refining and Petrochemical shut its 700,000 tpa MEG plant for two months. Yanpet shut its 350,000 tpa MEG plant in early May for 35 days of maintenance. South Korea’s LG Chem began a month-long turnaround at its 125,000 tpa MEG plant in Daesan in late March. In early May, Samsung Total Petrochemicals began a month-long shutdown of its 120,000 tpa MEG plant in Daesan. Kuwait's EQUATE shut down 550,000 tpa MEG capacity at its facility in Fhuaiba, Kuwait, slightly less than one-half of its total capacity, at the end of May for a turnaround. Additionally, two large producers in Asia have seen indefinite shutdowns: In March, Shell declared force majeure on MEG after shutting down its 750,000 tpa mixed-feed cracker on Pulau Bukom near Singapore. Also, problems have been seen at Nan Ya Plastics (unit of Formosa Plastics Corp)- the Yunlin county government ordered Nan Ya Plastics to shut its MEG plants for safety checks from 1 June following a fire at Formosa group’s Mailiao petrochemical complex on 12 May. Nan Ya’s four MEG units have a combined MEG capacity of 1.9 mln tpa- equivalent to 10% of Asia's total MEG capacity. Of that, Nan Ya supplies 100,000 tons of MEG to China each month.Nan Ya- Taiwan's MEG maker may be forced to enter the MEG spot market if it runs out of inventories to supply to its domestic contract customers. This is likely to have an impact on MEG prices in Asia, which are already on the rise after the county government ordered shut down of its MEG plants for safety checks from 1 June following a fire. Currently, the company is drawing on its MEG inventories to supply to its domestic contract customers. Nan Ya Plastics sought help from US-based Formosa Plastics Corp (FPC) for MEG supply in early June. Around 15,000 tons of cargo for loading on 16-25 June were heard to be heading towards Asia fromTexas. Nan Ya will cut its spot exports of around 100,000 tons of MEG to China for July. This is the second month that Nan Ya Plastics has called off its exports. The company has appealed to the county and central governments to allow it to restart operations at the facilities that were not involved in the fire in May. The shutdown at Mailiao will have a negative impact on domestic downstream markets, especially in the textile and pharmaceutical intermediaries sectors, president of Nan Ya Plastics. Potential downside for spot MEG prices is limited, as there is consistent buying interest from traders who are optimistic for H2-11 in view of the upcoming shutdowns in the region. So far, robust feedstock ethylene costs also lent support to MEG prices. However, abundant supply and lower-than-expected downstream demand should continue to exert downward pressure on prices. In late May, the shutdown at Nan Ya and the subsequent supply concerns caused MEG prices in Asia to surge US$15-30/ton. At the start of June, Asia's spot MEG continued to spike, surging by US$70-80/ton, as per ICIS. Short-term Asian MEG prices are likely to continue to hover within a narrow range for some time. Buying sentiment is expected to continue to be depressed by the expected soft co-feedstock purified terephthalic acid (PTA) prices in June, which is due to the upcoming large new capacities in June-August plus tight cash flows and credit limit. In the wake of Nan Ya shutdown, July could see SABIC plan to raise its monthly MEG allocation of 200,000 tons to China. Shell plans to sign an agreement with Qatar Petroleum on a petrochemical joint venture in Ras Laffan, Qatar, this year. With a start-up expected for 2016/2017, the project includes a cracker with a capacity of slightly less than 1 mln tpa and two 750,000 tpa MEG plants. Shell also plans a 15-20% capacity expansion of its Singapore cracker three years from now, which may include a downstream expansion at its 750,000 tpa MEG plant in Jurong, Singapore. However, a shortage of ethane feedstock may deter expansion, according to MEGlobal. Global demand is expected to continue growing at around 7% with China and India leading the way. Demand in China for 2011 is expected to be 17% - the same as in 2010, while India is expected to post double-digit demand growth for 2011. China's MEG consumption was more than 9 mln tpa for 2010, accounting for 43% of global demand. "Fundamentally nothing has changed, and MEG and DEG will be tight in the next three to five years," said Frank Hanraets, VP Commercial, at MEGlobal. "Hardly any new capacity will come on stream in this time, whereas approximately 1.5 mln tpa of additional product will be needed to satisfy demand. The tonnage required is equal to that of two new world-scale MEG plants. Since the Lunar New Year in February, short-term demand in the region has not been as strong as expected. However, in line with the start of seasonal PET demand in the US and Europe, demand is beginning to pick up in Asia. China, India and Pakistan are expected to rack up a combined 10 mln tons in additional polycondensation capacity in the next two-and-a-half years, which translates to an incremental 3 mln tons of MEG demand. Around one-third of MEG and two-thirds of PTA are needed for the polycondensation process for textiles. In 2011, 4.7 mln tons of polycondensation capacity is expected to become operational in China, boosting the country's capacity to 33.5 mln tpa, based on an ICIS study. MEGlobal markets 3 mln tpa of MEG globally, including 1.2 mln tons produced at its three plants in Alberta, Canada - which the company is considering debottlenecking, along with expansion of facilities. The company has concerns regarding MEG feedstock sources, but looking ahead it believes new technologies, such as methanol-to-olefins, coal-to-olefins or bio-based MEG, will provide them. A company attempting these new methods is China's Hebi Baoma Group, which is set to invest yuan (CNY) 2.5 bln (US$386 mln) on a new 250,000 tpa coal-based MEG facility at Hebi in Henan province. The plant is expected to start up in H1-2013 with an initial capacity of 50,000 tpa. The rest of the facility will come on stream about six months later.