Ethylene Oxide/Glycol Profitability In Doldrums: Prices of oxide and derivatives drop as demand growth slows and supplies rise, spurring antifreeze and polyester sales but hurting profit margins

The ethylene oxide and derivative ethylene glycol businesses are in a slump. Supplies are already excessive and planned additions will bring even more capacity on stream during the next three years or so. Behind the current slump is slow growth in demand, but, as is often the case, consumers of antifreeze, polyester, and other products derived from these chemicals are benefitting from much lower prices. However, lower prices mean smaller margins and thus lower profitability for producers of these major volume ethylene derivatives. Those in the industry generally expect profitability to remain above the low levels of late 1988 and early 1989. Most ethylene oxide is consumed captively in making derivatives, especially monoethylene glycol. Merchant sales account for only about 10% of production. Almost 60% of the ethylene oxide produced in the U.S. is converted to the glycol. In addition, diethylene and higher glycols and the various ethoxylates account for almost a quarter of ethylene ...