Recently, a conference held in Hangzhou by Dalian Commodity Exchange, China Petroleum and Chemical Industry The “2021 China Chemical Industry (Derivatives) Conference” co-sponsored by the Industrial Federation has received widespread attention from the market. The conference focused on “welcoming the new situation, gathering strength, and seeking development”. The guests discussed the current situation of the industry and discussed the development of the industry. At the Galaxy Futures sub-forum held at the same meeting of the conference, the guests conducted an in-depth analysis and outlook on the development and changes of the ethylene glycol market situation in the post-epidemic era. From the macro, fundamentals of domestic and foreign ethylene glycol markets, costs and profits to risk management strategies, the guests systematically analyzed the development trends of the ethylene glycol market in depth and discussed new opportunities for the ethylene glycol market under the new pattern.
The trend of the ethylene glycol market is inseparable from the impact of changes in the macroeconomic situation. Talking about macroeconomic analysis and prospects in the post-epidemic era, Liu Feng, chief economist of Galaxy Securities Co., Ltd., said that China’s economic structure has undergone transformational changes and the Chinese economy has entered a new economic era. China’s economy is recovering steadily and the economy continues to recover, but it is difficult to say that it is optimistic. Investment drives economic recovery, while consumption is relatively weak. Real estate and infrastructure investment are relatively resilient, and manufacturing investment has rebounded across the board. Consumption is slowly picking up, and exports remain optimistic. The “14th Five-Year Plan” proposes to promote “dual circulation” through internal circulation, and the core of expanding domestic demand is to encourage consumption. The main means to further expand the consumer market, especially the consumption of the residential sector, is to increase residents’ income.
In his view, the new economic era calls for the capital market to play its role in resource allocation. The indirect financing model mainly based on bank loans is no longer able to meet the financing needs of enterprises in the new economic era. It is necessary to serve the high-quality and healthy development of the real economy with the tertiary industry as the main driving force, prevent and resolve financial risks from an institutional perspective, improve the efficiency of financial services, accelerate the reform of financial marketization, improve the basic market pricing mechanism, and form a direct financing system. The “new financial” system with investment as the core promotes the healthy development of multi-level capital markets.
From the perspective of the ethylene glycol market and the global landscape, Zhao Jun, general manager of Sinochem International’s Chemical Raw Materials Division, said at the forum that the rapid development of China’s economy has given rise to the rise of ethylene glycol. Alcohol consumption has grown, and China has become the global consumption center of ethylene glycol. Global ethylene oxide (EO) production capacity is growing slowly, with new capacity mainly coming from China, while downstream demand is mainly used for the production of ethylene glycol. China’s ethylene glycol demand accounts for nearly 60% of the world’s total and is the source of stable growth of global ethylene glycol.
“From the perspective of the import structure, it mainly comes from the low-cost Middle East, including Saudi Arabia, Kuwait, Iran and other countries. Like Japan and South Korea, we believe that they will gradually be squeezed in the future Out of the Chinese import market. Because of its low-cost advantage, American products can gradually replace the import status of Japan and South Korea in the market through ethane cracking into ethylene and ethylene glycol,” Zhao Jun said.
In his view, global ethylene glycol production capacity will be accelerated after 2020, global trade volume will be relatively stable, and new production capacity will mainly meet the region’s own new demand. Imports of ethylene glycol from Northeast Asia (mainly China) are still increasing, and the Middle East and North America still play an important export role.
“The new ethylene glycol production capacity in North America is relatively limited, and its impact on China’s import market will be limited in the short term. The export volume of North American ethylene glycol will increase significantly after 2020, and it is expected that by Net export volume in 2021 will exceed 2.5 million tons.” Zhao Jun said that the new ethylene glycol production capacity in the Middle East is limited and has a limited impact on China’s import market.
Zhao Jun believes that coal price is a key factor in determining the income of the coal-to-ethylene glycol project. Ethylene glycol is a product of low coal prices, but its production capacity has grown rapidly in recent years. Ethylene prices fluctuate in tandem with oil prices, and the price of ethylene glycol falls sharply under low oil prices.
From the perspective of cost economy, low oil prices are beneficial to the integrated ethylene glycol project of the oil and gas heads. There is strong competition in the production of ethylene glycol through the cracking route of light hydrocarbons, while the production of ethylene glycol from coal must be based on high quality and high operating rate under high oil prices, so that the cost advantage can be revealed.
“With the rapid growth of China’s coal-based ethylene glycol production capacity, market competition will become fierce. With a large amount of ethylene glycol put into production and frequent fluctuations of ethylene, the import volume of ethylene glycol will gradually decrease, the industry will also usher in a new round of reshuffle.” Zhao Jun said.
As far as the domestic market is concerned, Hengyi Industrial R&D Director Wang Guangqian believes that the ethylene glycol market will usher in domestic private refining, ethane cracking and coal-to-ethylene glycol production capacity in 2021 In a year of concentrated expansion, the diversified supply pattern has caused the ethylene glycol market to still experience a round of cost path disputes for raw materials.
“From the perspective of ethylene glycol demand in the post-epidemic era, the ‘pothole’ in domestic and foreign textile and apparel consumption in 2020 (sluggish domestic and foreign terminal retail sales + active destocking in the industry chain) is expected to There will be greater replenishment opportunities in 2021. In addition, the terminal textile and apparel industry chain caused by the epidemic has been relatively thorough in destocking. In 2021, the replenishment cycle of domestic and foreign textile and apparel will start, coupled with the recovery of terminal consumption, it is expected to drive the polyester market to usher in a new era. The two-year demand expansion cycle can relieve MEG’s production capacity expansion pressure to a certain extent. However, in terms of demand rhythm, the cold winter in the fourth quarter of last year, the restocking of overseas home textiles, and the sharp increase in raw materials around the Spring Festival this year have had a negative impact on terminal textile consumption. �There is a certain overdraft, and the overseas epidemic has not been completely controlled in the second quarter. The country is also facing the suppression of structural tightening of credit policies. The driving force for the recovery of textile and apparel consumption at home and abroad is still unclear. In the second half of the year, with the significant increase in vaccination coverage in Europe and the United States and the marginal improvement of the epidemic, the textile and clothing consumption scene has recovered significantly. Domestic and foreign textile and clothing companies are expected to usher in a vigorous inventory replenishment cycle, thereby affecting the price of ethylene glycol from the demand side. Form strong support. “Wang Guangqian said.
“From the perspective of industry profits, the profits of the ethylene glycol industry have undergone major changes in 2020. Domestic oil head equipment tends to be slightly profitable, but relatively high, and coal heads and MTO devices all suffered serious losses. “Jia Yinggui, marketing director of Shanghai Pujing Chemical, said that the construction of domestic coal-head equipment will stagnate unless there are downstream companies with immediate needs. Oil-head equipment is still expanding and continues to occupy the domestic market.
In Jia Yinggui’s view, 2021 will be the peak year for domestic ethylene glycol production, which will intensify competition in the industry. Coalhead and MTO units are facing partial shutdown or conversion. “In the long run, the entire ethylene glycol industry may enter low profits for a long time, and oil prices The impact on the ethylene glycol industry will weaken, and supply, demand and cost will be the most important factors affecting prices and unit profits. “Jia Yinggui said.
Faced with the new situation and development of the industry, the use of futures derivatives for risk management has also become a necessary means for ethylene glycol companies. In addition to futures tools on the market, The OTC market is also increasingly favored by enterprises in the ethylene glycol industry.
It is understood that in 2020, Galaxy Futures’ OTC derivatives business accumulated a total of 8,386 transactions, with a cumulative nominal principal of 1,436.3 100 million yuan. Among them, 2977 financial transactions were targeted, with a cumulative nominal principal of 56.826 billion yuan; commodities were 5409 transactions, with a cumulative nominal principal of 86.804 billion yuan. Currently, it involves OTC options, income swaps, futures business, and standard positions. Single financing, options and futures hedging, cooperative basis trading and other business models.
“The function of futures tools is relatively simple and can only be used for value preservation in both buying and selling directions. Options tool strategies It is richer and can be combined with customers’ accurate judgment of the market to formulate portfolio strategies with higher flexibility. “Song Yang, head of the Energy and Chemical Investment Research Department of Galaxy Futures, said that Galaxy Futures will strive to create more product businesses with differentiated competitive advantages to better serve the stable operations of polyester industry enterprises.
In Song Yang’s view, before companies use futures and derivatives tools for risk management, they need to think about which contracts to operate on, how to open positions at the right time and price, and the subsequent position transfer operations that may be involved. Which method should be used to close the position, whether to carry out delivery or cash on time, etc. “In this process, companies need to think about who makes decisions, how to supervise, how to evaluate the operation, and what kind of assessment and incentive mechanisms are set up. focus. “Song Yang said.
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