Beginning in late October, ethylene glycol has once again entered a downward pattern. Although there have been occasional rebounds during this period, the overall situation is still weak. As of November 18, the main ethylene glycol contract 2101 closed at 3753 yuan/ton. For the market outlook, we believe that the overall trend of ethylene glycol is still weak due to the new production capacity and the gradual off-season on the demand side. However, the decline in the price of ethylene glycol will also be limited under the support of cost.
The supply pressure is still high
Entering November, domestic ethylene glycol production capacity is still continuing. At the beginning of November, the 200,000-ton/year plant in Yongcheng, Henan and the 600,000-ton/year plant in Xinjiang Tianye Phase 4 were successfully discharged, and the plant load was steadily increasing; in the later period, there were 4 sets of plants in Sanning, Hubei, totaling 1.24 million tons/year The production capacity is planned to be released around December. If the plant is put into operation smoothly, the domestic ethylene glycol annual production capacity will exceed 17 million tons to 17.221 million tons by the end of 2020, a significant increase of 6.19 million tons from the end of 2019, an increase of 56.11%. According to the latest production capacity and start-up data, on November 18, domestic ethylene glycol production was about 26,300 tons per day, an increase of 6,400 tons compared to the same period in 2019; as new production capacity is put into operation in the later period, domestic ethylene glycol production is expected to increase further , Ethylene glycol supply pressure is still relatively large.
Demand gradually turns into the off-season
With the "Double Eleven" and overseas Christmas orders basically over, the terminal weaving market has gradually turned into the off-season, and the direct downstream polyester market of ethylene glycol will decline earlier. Beginning in late October, after several weeks of high production and sales, as the replenishment of downstream companies has basically ended, although the start of the polyester plant has remained stable for the time being, market transactions have returned to flat. Except for the company’s price cuts to promote production and sales, Most of the time, the production and sales of all varieties of polyester were maintained at about 50%, which was a significant gap compared with the average weekly production and sales of “breaking 100” in mid- to early October. In the week of November 12, the average weekly production and sales rate of domestic polyester chips was 121.84%, an increase of 19.84 percentage points from the same period in 2019; the average weekly production and sales rates of polyester staple fiber and filament were 110.59% and 89.18%, respectively, compared with the same period in 2019. Increased by 22.59 and 5.18 percentage points respectively.
On the other hand, port inventory is continuously de-stocked. As the United States was continuously affected by multiple hurricanes in the early stage, several local ethylene glycol plants were forced to shut down. After losing a major import source country, my country’s ethylene glycol imports declined month-on-month, and the port inventory in East China also entered In the continuous destocking stage, the absolute amount of ethylene glycol port inventory is still at a high level due to the large accumulation of warehouses in the previous period. As of November 16, the ethylene glycol inventory at East China ports was 1.0878 million tons, a decrease of 336,400 tons from the peak on July 20, and a sharp increase of 660,800 tons from the same period in 2019.
Cost support is relatively strong
Thanks to the sharp drop in international oil prices during the year, the processing cost of oil-based ethylene glycol has dropped significantly, and the previous cost advantage of coal-based ethylene glycol processing no longer exists. Except for July, oil-based ethylene glycol can maintain a certain processing profit for most of the period in 2020, while coal-based ethylene glycol has been in a state of substantial loss for a long time, and the processing profit was once close to -1500 yuan/ton. Combining the two processes of oil and coal, the current overall ethylene glycol processing profit performance is poor. Therefore, the cost of ethylene glycol will receive strong support without further decline in the price of raw materials. According to estimates, as of November 16, the domestic oil-to-ethylene glycol processing profit was 195 yuan/ton, and the coal-to-ethylene glycol processing profit was -978.2 yuan/ton.
In short, the intensified contradiction between supply and demand and cost support have restricted the rise and fall of ethylene glycol futures prices. In the later period, ethylene glycol will mainly oscillate weakly.
Source: Chemical Network
