MEG Industrial Chain Integration Level Improved amid Capacity Expansion
Preface: China’s MEG capacity has moved up notably since a new round of MEG capacity expansion started in 2020. The supply structure of MEG also changed obviously, with the pricing power of PET improving due to the increments in MEG-PET units.
In China, over 93% of the MEG resources are consumed in the PET industry. The PET industry accounts for more than 93% of the downstream consumption of MEG in China. Before this round of capacity expansion, MEG producers were mainly petrochemical enterprises such as Sinopec, PetroChina, etc., and coal & coal chemical enterprises such as Henan Province Energy Chemical Group, Shandong HUALU-HENGSHENG Group, etc. Most of these enterprises had upstream refining units, chemical units, and coal resources, but lacked downstream PET units.
Only Sinopec, PetroChina, and Henan Province Energy Chemical Group had matched PET units, whose capacity occupied a small proportion of the total.
2022 China MEG-PET Units Capacity
Remarks: The capacity marked in red is the unit planned to be built.
The proportion of MEG-PET integration increased significantly, with PET enterprises such as Hengli Petrochemical, Zhejiang Petroleum & Chemical, etc. putting their refining & petrochemical units into operation. Up to December 2022, the capacity at MEG producers was 24,972kt/a, and this with matching PET units was 11,552kt/a, occupying 46.26% of the total. The capacity of PET producers reached 71,685kt, among this it with matching MEG units was 19,805kt, occupying 27.63% of the total.
The MEG units at large-scale PET producers such as Shenghong Refining & Chemical, Xinjiang Zhongkun New Material, Sichuan Zhengdakai New Material, etc. will come on stream in the near future. Anhui Haoyuan Chemical put a 600kt/a unit of PET bottle slices into operation. Matching upstream or downstream devices at MEG producers can reduce the impact of the industry downturn by matching upstream or downstream devices amid intensifying market competition.
China’s domestic MEG supply surged caused by the increments in MEG-PET units and capacity expansion. Thus, the market share of imported MEG was squeezed, which cut the import dependence degree. The proportion of MEG supply from PET producers moved up constantly, improving the pricing power of PET producers. The pricing powder of MEG producers who didn’t match downstream devices was squeezed notably. The profits of the PET industrial chain moved from MEG to other products constantly.
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