Entering 2022, under the influence of various factors such as the continuous rise in international oil prices and the unexpected maintenance of domestic equipment leading to another decline in supply, domestic ethylene glycol futures prices continued to fluctuate and rise after breaking through the 5,000 yuan/ton mark on the first trading day of the new year. On January 14 The main contract EG2205 reached a high of close to 5,400 yuan/ton during the day, hitting a new high in more than two months. Regarding the market outlook, we expect that ethylene glycol prices will fall due to the restart of maintenance equipment and the impact of downstream production shutdowns before the Spring Festival, but cost support will limit the room for future price declines.
Immediate shutdown of equipment for maintenance affects start of work
In early January 2022, the overall start-up of domestic ethylene glycol plants remained around 50%-51%. However, starting in the middle of the year, three sets of Zhejiang Petrochemical Phase 1, Xinhang Energy, and Anhui Red Sifang with a total capacity of 1.35 million tons were unexpectedly shut down for maintenance. Coupled with the postponement of the restart plan of the Zhejiang Petrochemical Phase 2 unit that was shut down for maintenance at the beginning of the month, the operating rate of domestic ethylene glycol units has once again dropped below 50%. In the short term, the pressure on the ethylene glycol supply side has been eased, and market sentiment has also been boosted. On January 14, the comprehensive daily operating rate of domestic ethylene glycol was 48.49%, a decrease of 10.33 percentage points from the same period in 2021; among which, the operating rate of oil-to-ethylene glycol was 59.42%, a decrease of 4.44 percentage points from the same period in 2021, and the operating rate of coal-based ethylene glycol was 59.42%. The operating rate of ethylene glycol production was 35.05%, a decrease of 14.87 percentage points from the same period in 2021.
According to the current plan, the two temporary shutdown units of Zhejiang Petrochemical Phase 1 and Anhui Hongsifang are scheduled to restart in the middle of the month, while the Phase 2 unit of Zhejiang Petrochemical that was shut down for maintenance at the beginning of the month is scheduled to restart at the end of the month, plus some coal-making units planned to be restarted and Zhenhai Refinery’s new 800,000-ton unit is about to be put into production. The start-up of domestic ethylene glycol units is expected to increase in the second half of January, and the pressure on the ethylene glycol supply side will still increase.
After experiencing active load reduction in the fourth quarter of 2021, polyester companies’ own inventory pressure has been released to a certain extent. In order to cope with the peak consumption season after the Spring Festival and possible passive parking in the future, companies have a certain willingness to actively replenish inventory. Recently, polyester equipment There was no significant drop in construction start-up unexpectedly, and there was even a slight rebound in the middle of the month, and the demand side of ethylene glycol stabilized. On January 13, the daily operating rate of polyester factories was 81.09%, an increase of 2.03 percentage points from the beginning of the year and a decrease of 2.87 percentage points from the same period in 2021.
As the Spring Festival holiday approaches, the number of downstream polyester and terminal weaving enterprises may increase in suspension of production and holidays in the second half of January. At present, the loom operation has dropped to less than 50%, and there is a possibility of further decline in the later period. This is also This will increase the downward pressure on the start-up of polyester factories in the later period. Therefore, we expect that the start-up of polyester companies will decline before the Spring Festival, which will weaken the demand for ethylene glycol.
Processing profits remain at a loss
Judging from the theoretical processing profit calculations of the two ethylene glycol processes, oil and coal, they are still in a state of loss, which also makes the recent fluctuations in raw material prices have a stronger impact on ethylene glycol. Although the market’s concerns about the Federal Reserve’s interest rate hikes have increased recently, the current impact of the Omicron mutant strain on the demand side of crude oil has tended to be moderate, and there are still expectations of tightening in the supply side of crude oil in the near future. We expect that international oil prices will remain stable in the near future. Warm oscillation operating trend. Regarding domestic coal, with demand expected to weaken in the later period and the Indonesian ban temporarily coming to an end, it is expected that it will mainly operate in a weak oscillation. Taken together, there is still strong support for the cost of ethylene glycol raw materials in the later period.
According to estimates, on January 14, the theoretical processing profit of domestic oil-to-ethylene glycol was -440.6 yuan/ton, a decrease of 678.6 yuan/ton compared with the same period in 2021; the theoretical processing profit of coal-to-ethylene glycol was -501.6 yuan/ton, which was -501.6 yuan/ton, compared with the same period in 2021. In the same period of 2021, it will increase by 615 yuan/ton.
Regarding the market outlook, we are temporarily cautious in the short term. Judging from the current equipment change plan, the restart of maintenance equipment and the commissioning of new equipment in the second half of January will increase the start-up of ethylene glycol, while the start-up of the downstream polyester end is expected to decrease due to the impact of corporate holidays and production shutdowns, and the supply and demand pattern of ethylene glycol will weaken. In addition, in terms of cost, the current oil and coal process ethylene glycol still maintains a loss-making state. It is expected that international oil prices will oscillate warmly in the near future while domestic coal prices will oscillate weakly. There is still support for the cost end of ethylene glycol. Therefore, it is expected that ethylene glycol futures prices will fall before the Spring Festival, but the room for decline is limited.
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