The rise and fall of raw materials is the most important factor affecting the price of downstream products, and cost guidance is the strongest baton, at least for chemical products. From mid-April to the end of April, the rise in oil prices led to the strengthening of PTA, while ethylene glycol was subject to poor supply and demand expectations and only experienced a period of stabilization. However, coal prices have skyrocketed since May, and the coal chemical industry, represented by methanol, has exploded in recent days. Since coal-to-ethylene glycol production capacity accounts for about 40%, the cost baton has also fallen into the hands of EG this time, making it the strongest performer in the polyester chain in recent times.
The country currently has an ethylene glycol production capacity of approximately 16.23 million tons, of which the coal-to-ethylene glycol plant capacity accounts for 6.39 million tons. Then coal prices continue to rise. Taking the thermal coal futures market as an example, the 09 contract rose to a maximum of nearly 150 yuan/ton in May. For some companies that produce ethylene glycol from external coal, for every 100 yuan/ton increase in coal prices, their production costs will increase by 300-400 yuan/ton, directly driving up MEG valuations. The soaring cost of coal production has resulted in increased losses in the industry. According to Longzhong data, the profit loss of coal-based ethylene glycol was more than 800 yuan/ton on May 11. The worsening losses have reduced the enthusiasm of coal-based companies to start operations. , the current operating rate of coal-to-ethylene glycol has dropped to 49.83%.
According to historical observations, the start-up of coal-to-ethylene glycol is relatively sensitive to the impact on profits. When profits continue to remain low, the number of factory shutdowns for maintenance is relatively high. Therefore, if losses continue, there is still room for downward adjustments in operating rates. Of course, with the rapid increase in oil-based ethylene glycol production in recent years, as long as subsequent new production capacity is put into operation, even if the coal-based production operating rate is further reduced, it will not change the market’s view of future supply and demand expectations.
Of course, at this stage, the rapid rise in costs not only stimulates valuations but also affects supply. In May, EG was already in a period of intensive maintenance, and the production progress of new devices was slightly slower than expected. At present, the only new devices that can achieve stable production are Satellite Petrochemical, Zhejiang Petrochemical, Hubei Sanning, Jianyuan Coal Coking, etc. The actual contribution of production will most likely not occur until June. This delayed the arrival of the supply wave, and EG ushered in an unexpected rise.
Of course, this is in line with the logic described on the market, and areas that are inconsistent with reality will naturally become risk points in the future. For example, judging from the actual cost of the factory, the procurement of ethylene glycol raw coal is mostly based on the long-term contract. When the spot price rises sharply, the long-term contract price is generally lower than the spot price. The impact of rising coal prices on the cost side of ethylene glycol is not as great as the market performance. big. At the same time, with the gradual release of new production capacity, as mentioned above, and the import shipping schedule overseas arrivals may be concentrated in mid-to-late May, the long-term supply and demand contradiction is still relatively serious, which is the biggest risk point.
In addition, similar to PTA, since processing fees have risen to a high level after the year, the recent market growth has been limited. When the valuation of ethylene glycol is restored, it will also face the exhaustion of momentum in this regard. Judging from the recent performance of short fiber, it is difficult for the polyester end to have explosive support for the time being. It is reported that due to the recent flat production and sales of downstream polyester, profit levels are mostly near the break-even line, and some factories have plans to reduce production. However, these negative feedbacks are still expected and will be interpreted differently as the atmosphere in the venue changes. At least there is currently no prediction of a significant load reduction. However, if terminal orders always perform mediocrely, it will be difficult to provide upstream support on the demand side.
In general, the biggest reliance of this round of bull raids is on cost power, coupled with the stronger-than-expected reality. However, since the market’s expectations of supply and demand have not yet changed, it can be a reason to restrict the market at any time, so the market will rise. The continuity of the trend also depends on the marginal changes in these factors that promote the rise. </p
