This year is not a good year for all major textile and chemical fiber raw materials. More than 80% of the varieties have experienced negative returns. Among this large number of victims, who is the worst offender? The answer naturally belongs to ethylene glycol, which has been cut in half in the past month. Compared with the high at the beginning of the year, ethylene glycol has shrunk by nearly 50%.
Compared with PTA and other downstream polyester products, ethylene glycol, which continues to hit new lows in profits, can be called the worst variety in the polyester industry chain. After the Fed raised interest rates by 75bp in mid-June, the macroeconomic situation turned pessimistic, with high ethylene glycol inventories and weak supply and demand. Prices fell sharply again and hit new lows.
At the same time, due to the sharp fall in prices, the ethylene glycol unit has also suffered losses to a new height. All processes have suffered losses. Coal-based, oil-based, and ethylene glycol-based ethylene glycol have all suffered substantial losses. The current weighted loss is 1,600. Yuan, the weighted loss of ethylene glycol from January to June 2022 was 1,300 yuan, and the losses of ethylene glycol equipment were severe.
Its own inventory is high and downstream operations are poor!
Ethylene glycol two stages cool
In the editor’s opinion, the loss of ethylene glycol mainly comes from the impact of its own high inventory and poor downstream production.
1. High level of own inventory: surplus state due to large-scale production of equipment
In terms of its own inventory, the current inventory of ethylene glycol is 1.26 million tons, which is 600,000 tons higher than the inventory of 660,000 tons at the beginning of the year. The inventory pressure is huge.
1. The commissioning of new equipment is concentrated in the first half of the year
As of June, the total production capacity of ethylene glycol was 2.1 million tons, the coal production process was 1.3 million tons, and the coal chemical industry was put into production to deceive high prices. The ethylene glycol production capacity base is 22.595 million tons. The production volume in the first half of the year was relatively high, and the production capacity growth rate reached 10%. Looking at the second half of the year, new oil processing units are expected to be put into operation at the end of the year or in 2023. The units that may be put into operation are focused on Kunpeng and Shaanxi Coal Yulin Phase I. The units that may be put into operation in the second half of the year are about 800,000 tons. There are not many plans for the second half of the year, but the overall situation is already in excess.
2. Output increased significantly year-on-year
The production capacity base rose too fast, and the operating rate dropped significantly seasonally in the second quarter, but output increased significantly year-on-year. In the first five months, ethylene glycol output was 5.912 million tons, a year-on-year increase of 26.4%, of which coal production increased by about 37% year-on-year. With oil prices high, the coal chemical industry is relatively competitive and its output has grown significantly.
Pressure on leading polyester companies to reduce production increases again
The ethylene glycol market is getting worse
On the other hand, from the perspective of demand, the load of downstream polyester is far lower than the start-up level in previous years. The current start-up of polyester is at 84%, while the start-up in previous years fell by around 6-8%. The negative feedback brought about by the rapid decline in prices across the entire industry chain has led to an increase in polyester cash flow losses. At the same time, the dividends from inventory appreciation since May have disappeared for polyester companies, and they are facing the pressure of rapid depreciation. The cash flow based on 25-day moving average cost accounting has also declined. Losses have occurred again, and polyester companies with high inventories, especially leading companies, are under pressure to reduce production again. Against this background, it was reported on the 29th that several leading polyester companies plan to self-disciplinely reduce production by 30% again, which will make the ethylene glycol market even worse!
The huge loss of ethylene glycol has brought about a significant reduction in production of the device. The current load of ethylene glycol is 56%, which is about 18% lower than the detected 74%. In terms of imports, import volume decreased by 3% from January to May, and overseas equipment also reduced production significantly.
Extremely poor downstream demand for ethylene glycol has led to high inventories of ethylene glycol. Huge losses caused by high inventories continue to trigger industrial production cuts. The ethylene glycol industry chain is in a difficult state of survival. The extent of losses may be improved through production cuts, but turning losses into profits is temporary. It’s extremely difficult to watch. In the context of rapid growth in production capacity, it is difficult to achieve considerable profits in ethylene glycol production, and a balance will be found in the low-profit state in the medium and long term.
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