After the May Day holiday, the independent market trend of ethylene glycol in the polyester sector successfully attracted the market’s attention. Up to now, compared with PTA and staple fiber in the same industry chain, the trend of ethylene glycol can be regarded as “outstanding”.
The reporter observed that in recent days, ethylene glycol has still performed relatively strongly in the sector. Among chemicals, it has been allocated as a short position, but recently it has been more of an optimal allocation for long positions, ranking among the top five in terms of capital flow.
During the interview, the reporter learned that the reason why ethylene glycol will have a more independent market in the near future is mainly because the supply side is expected to reduce.
Hongye Futures analyst Zhang Yongge told reporters that since April, maintenance companies have been relatively concentrated. Zhejiang Petrochemical’s 750,000 tons has been shut down, and 800,000 tons will be shut down in the second half of the year. Satellite Petrochemical will also undergo maintenance in mid-May. In addition, although the efficiency of coal chemical industry has improved due to the decrease in cost, Jianyuan, Guanghui, etc. have increased their load, but Shaanxi Coal Weihua, Xinjiang Tianye, etc. have been undergoing maintenance, and the total supply of ethylene glycol has shrunk significantly. Last week’s temporary shutdown of a chemical plant in Yulin, Shaanxi Province amplified the pressure to tighten supply.
At the same time, periodic imports are shrinking, and explicit inventories at ports are declining rapidly.
According to Shenwan Futures analyst Yuan Wei, it was difficult to remove ethylene glycol port inventory in the first quarter and has been hovering above 1 million tons. The market lacks a relatively obvious fundamental gap, making the market performance relatively tepid. However, after May Day, port inventories dropped to 991,000 tons, with Taicang District having the largest decrease, with 24,100 tons destocked, a decrease of 12.75%.
In Yuan Wei’s view, the overall expected arrival at the terminal in May is low, especially in the first half of the year when the arrival volume continues to decrease. Driven by the reduction of foreign trade, compression of domestic trade and urgent demand replenishment, ethylene glycol port stocks continued to be depleted after the holiday. “The data we have tracked shows that only 84,300 tons arrived at the port last week. Considering the recent shipment situation, there are still certain expectations for a reduction in inventory. The phased destocking may last for a period of time, which gives the market an effective way to destock. It’s expected.” Yuan Wei said.
It can be seen that the main driving force for the recent strength of ethylene glycol comes from port destocking, and the trading logic behind it is similar to that of PTA in the first quarter.
“Against the backdrop of generally weakening demand, the market is on the supply side of the transaction.” Yuan Wei told reporters that PTA’s PX maintenance and major factory stocking hot spots in the first quarter have been fulfilled, and ethylene glycol is currently returning to PTA’s old path. “The transaction will be driven by the port’s first destocking to less than 1 million tons, in line with EO’s expected production conversion,” he said.
The reporter learned that after ethylene glycol experienced sustained deep losses in 2022, the refinery adjusted the downstream configuration of ethylene cracking. Since the end of last year, news of domestic leading companies switching to EO has spread like wildfire in the market.
Among them, some factories of Hengli Petrochemical, Satellite Petrochemical, Zhejiang Petrochemical and Sinopec are undergoing technical transformation, increasing the configuration of EO and other related products, and the ethylene glycol units involved in the conversion will reach 3.5 million tons. Among the syngas plants, Hualu Hengsheng has completed the conversion of the ethylene glycol unit to produce DMC in 2020, and its 500,000 tons of ethylene glycol currently maintains low-load operation. Last week, it was reported that the 600,000-ton unit in Hubei Sanning will be converted to produce synthetic ammonia.
“If all the above units are converted as planned, 4 million tons of ethylene glycol will be involved in the conversion, accounting for about 15% of the domestic ethylene glycol production capacity. If we consider that a large number of units are currently in long-term shutdown, the proportion of the converted production capacity will be Reaching more than 25% means that the domestic ethylene glycol operating rate will drop from around 60% to about 45%.” In Yuan Wei’s view, production conversion may be an important way to improve the supply and demand of ethylene glycol. Once the market trades this logic, ethylene glycol will Diols will have the opportunity to go long on dips.
“Judging from the actual progress, the current news of integrated parking and maintenance is gradually coming to fruition. Currently, Zhejiang Petrochemical will stop one line at the beginning of May and plans to stop another line at the end of May. Satellite plans to stop one line for maintenance at the end of May, and Hengli plans to perform maintenance in July. Switch to EO.” Zijin Tianfeng Futures analyst Liu Siqi said that the integrated device overhaul has been implemented, but the planned EO switching volume is still unclear. The economic margin of ethylene oxide is weakening, and the integrated device may switch to other ethylene downstream products. Transition to maintenance shutdown.
In Liu Siqi’s view, the current impact of integrated parking is to bring about short-term supply improvements. If the device will not be switched to other downstream products, the sustainability of the supply improvement may need further observation. In the short term, supply will still be reduced and demand will increase, and in the future it will still be Pay attention to the switching action.
“Overall, there will be a certain gap between the expected production conversion of ethylene glycol and the actual production of ethylene glycol. In the future, when this logic switches between reality and expectations, it will bring fluctuations to the ethylene glycol market.” Yuan Wei said .
However, it is worth noting that the price of ethylene oxide has continued to decline recently. The continuous price decline starting this week and the bleak sales situation in the market have made the market doubtful about the degree of realization of the conversion of large refining and chemical companies in the later period.
“The current price difference between EO and ethylene glycol has dropped from 1,980 yuan/ton in late March to the current 640 yuan/ton.Around yuan/ton. Although the profit of EO is still better than that of ethylene glycol, because EO products are obviously restricted by storage and transportation, and the market capacity is limited, there is limited room for later adjustments on the production side. “Yuan Wei said.
Hengli Futures analyst Zhou Yun said that at present, the conversion of major domestic manufacturers has not been as expected and has been partially delayed. However, the market’s expectations for the conversion of companies are still high. Since this year, ethylene glycol has become a multi-species product in the market. .
“According to recent market conditions, affected by overseas device maintenance and internal and external price differences, the price of ethylene glycol has very strong support near the 4,000 yuan/ton round mark. In the future, we still need to pay attention to ethylene glycol port inventory and shipments.” Zhou Yun said that judging from the current shipping schedule, arrivals after mid-May will gradually recover. It is expected that the process of port decontamination will gradually come to an end, and the probability of inventory falling below the 900,000-ton mark is limited. In addition, it is also necessary to continue to pay attention to the polyester operating rate.
Liu Siqi said that as the supply of ethylene glycol improves, demand increases, and the short-term drive is upward. However, other downstream ethylene products have average economics, and the amount of EG units switching to other products may decrease. The sustainability of the improvement in ethylene glycol supply is questionable.
Looking forward to the market outlook, Yuan Wei believes that the operation of integrated ethylene glycol units to reduce EO has gradually increased, and the conversion of some units continues to be delayed. As the supply-side benefits are basically fulfilled, ethylene glycol prices may come under pressure.
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