Since the fourth quarter of last year, terminal demand has entered the off-season. Many domestic coal-based olefin enterprises have stopped for maintenance. The demand for methanol, especially in eastern China, has shrunk sharply. In this case, the supply and demand pattern of methanol market is unbalanced, and methanol prices tend to be weak after the Spring Festival.

Supply pressure released

In terms of domestic supply, according to data released by Longzhong Information, the methanol plant overhauled before the Lantern Festival will usher in a peak of re-production, which will reach 7.19 million tons from mid-late February to early March. From late March to April, 2.75 million tons of methanol plants will be re-produced one after another in China. However, after the end of March, the domestic methanol market will be overhauled in spring, when some domestic methanol enterprises will carry out overhaul, which will eliminate the impact of methanol production in late March on domestic methanol production. Therefore, in this case, after the peak of methanol production at the end of this month, the market supply pressure will basically be released.

On the import side, as several methanol plants in Southeast Asia reduce their load, the international methanol supply shows a slight decline, and the domestic methanol price has risen from the bottom. In fact, from the current situation, the arbitrage space of methanol import is gradually narrowing, which will have a certain inhibitory effect on methanol import.

In terms of inventory, the high inventory is an important reason to restrict the continuous rise of methanol price. As of February 21, methanol port stocks in eastern and southern China were 836,000 tons, up 357,200 tons from the same period last year, with an increase of 74.60%, the highest since 2014. Among them, the inventory of methanol ports in East China was 607,500 tons, up by 234,500 tons compared with the end of last year, up by 62.87%; the inventory of methanol ports in South China was 228,500 tons, up by 12.27 tons, up by 115.97% compared with the end of last year. However, recent market participants reported that due to the change of market mentality, the willingness of traders and enterprises in East China to take goods increased significantly, which helped to alleviate the high methanol inventory in the southeastern coastal areas.

Expectations of a warming demand increase

After the Spring Festival, downstream demand for methanol has recovered, which forms a certain support for methanol prices. In terms of traditional demand, traditional downstream enterprises of methanol have resumed production after the Spring Festival. According to the data published at present, besides formaldehyde, the start-up load of acetic acid, dimethyl ether, MTBE, DMF and other enterprises has shown a steady and rising situation, and the market demand for methanol has warmed up. In terms of emerging demand, due to the obvious repairs of the profits from methanol extraction to olefins and the entry of terminal film into the peak consumption season, many domestic coal-based olefin plants which had been repaired earlier have recently resumed production. At present, coal-based olefins account for nearly half of domestic methanol consumption, so the warming of coal-based olefins will play a strong role in stimulating domestic methanol demand, especially in eastern China.

In summary, although domestic methanol enterprises concentrated on re-production, high inventory, the overall supply pressure is still great, but from the current situation, the supply side of the shortfall has basically been realized, do not have the conditions for further deterioration. On the other hand, in the spring, the downstream consumption of methanol began to pick up gradually. In this case, the overall supply and demand pattern of methanol will gradually transform, the excess supply will gradually ease, and the price focus of methanol is expected to gradually rise. Based on the above judgment, we believe that the current methanol has a certain long-term value, which can be established in the medium and long term after the price exceeds 2600 yuan/ton.

Since 2019, Ethylene glycol futures have maintained low adjustment after stabilization, and are now consolidated at 5150 yuan per ton. Industry insiders pointed out that the recent recovery of the crude oil market has brought support to the entire chemical market, but the glycol futures price is limited by its weak fundamentals and insufficient willingness to follow up. Future price rebound mainly depends on the inventory level, which takes some time.

Insufficient willingness to follow price increases

In the spot market, the price of ethylene glycol in East China remained volatile last week, with weak market turnover and low interest in downstream purchases.

From the upstream crude oil market, since 2019, the overall performance of the crude oil market is strong, but recent data show that U.S. crude oil production reached a record high, and inventories rose for five consecutive weeks, so last week there was a slight decline.

Fundamentally, the data provided by Founder medium-term futures show that the current ethylene glycol load is 80.59%, of which the coal chemical load is 72.8%, and the current polyester load is 79.71% in demand, and the polyester gradually resumes operation.

In terms of inventory, the latest data from Jin Lianchuang show that the total inventory of ethylene glycol in East China on February 21 is 109.2 million tons, an increase of 26,000 tons compared with February 14. Among them, Zhangjiagang is 804,000 tons, Taicang is 117,000 tons, Ningbo is 76,000 tons, Jiangyin is 41,000 tons and Yangshan is 54,000 tons. Inventories in major ports continue to accumulate around the Spring Festival and have reached a new high in recent years.

“Persistent high inventory pressure and high start-up load of domestic ethylene glycol plant make the short-term factor of supply side continue to ferment in the near future. Therefore, ethylene glycol futures have become short-term targets for chemical products. Some hedging operations are in the form of short-term ethylene glycol futures, which makes the price of ethylene glycol insufficiently willing to follow up when chemical products rise, but become the fastest-falling production when they fall. Product. ” Gao Shihong, a chemical analyst at Jinlianchuang, told China Securities News.

Xinda futures analysts Xu Lin and Han Bingbing said that the stock pressure in the ethylene glycol market is high, and the absolute volume is at a historical high. Under the pressure of high inventory, the profit of the ethylene glycol industry has been poor for about two months. Four sets of equipment involving 1.3 million tons in Jiangsu and Zhejiang are planned to reduce the load or stop, which may support the price of ethylene glycol in a short time. We need to pay attention to the specific situation of the later operation of the equipment.

It takes a long time to get out of stock.

Generally speaking, Liang Jiakun, a futures analyst at Fangzheng Medium Term, said that due to oversupply, stock accumulation, polyester load increased slowly, downstream demand was flat, and supply-demand pressure remained high. However, considering that some of the process cash flow of ethylene glycol is negative, there is limited room for prices to continue to fall, and low oscillation is expected to dominate in the short term.

“Recently, international crude oil continues to rise, ethylene and naphtha upstream raw materials of ethylene glycol have increased significantly, while ethylene glycol does the opposite and does not rise and fall, resulting in a variety of process ethylene glycol factories facing greater cost pressures. The increase in the price of ethylene glycol seems to be expected to be due to a reduction in the premium at the ethylene glycol plant, but there is no sign of that yet. Gao Shihong’s analysis.

Gao Shihong believes that even if there is a negative price reduction in the glycol plant, it will take some time for the effect to appear. Therefore, if the glycol market wants to get rid of the current predicament, it mainly hopes that downstream demand will turn around. With the improvement of demand in polyester factories, the market mentality gradually recovers after ethylene glycol enters the de-inventory stage. With the relatively low price, the price of ethylene glycol may have a wave of market, but from the current situation, it still takes a long time to enter the de-inventory cycle.

The International Energy Agency (IEA) released the Global Coal Market Report (2018-2023) in Beijing on May 25. According to the report, China’s coal demand has entered a slow downward trend, and the average annual coal consumption will decline at a structural rate of less than 1%.

Coal is still the core of the global energy system, the report said. Because of the advantages of affordable price, abundant reserves and easy transportation, coal is still the main energy source in many countries. Especially in China, South Asia and Southeast Asia, coal also provides energy security and energy popularization functions, and supports local economic development.

The report predicts that global coal demand will remain stable in the next five years. Coal consumption in Europe and the United States will decline, but the decline will be offset by growth in India and other Asian countries. The contribution of coal to the global energy structure will decrease from 27% to 25%, mainly from renewable energy and natural gas.

According to the report, 1 ton of every 4 tons of coal in the world is used for power generation in China. Therefore, the fate of coal largely depends on China’s power sector.

Liu Baohua, deputy director of the State Energy Administration, said at the meeting that 70% of China’s coal-fired power units have achieved ultra-low emissions. China has built the largest clean coal-fired power supply system in the world, effectively alleviating the contradiction between energy supply and environmental protection, and demonstrating the clean use of coal worldwide.

The conference was jointly organized by the International Energy Agency and the National Energy Group and sponsored by China Shenhua Energy Co., Ltd.

Following the consecutive surge, the crude oil market has recently recovered, with the main domestic crude oil futures contracts falling by 4.73% on February 26. The sharp drop in oil prices also dragged down futures prices of fuel oil, asphalt and PTA. Analysts said that the comments made by President Trump on oil prices and Russia’s weak capacity to cut production were all a drag on the trend of oil prices. It is expected that the short-term oil price will maintain the trend of recovery, but the medium and long-term is still expected to oscillate upward.

Crude oil futures plummeted

Domestic crude oil futures fell sharply on the 26th, with the main 1904 contract closing at 427.5 yuan/barrel, a new low since February 12, closing at 433.1 yuan/barrel, down 4.73%. Fuel oil futures fell sharply with the main 1905 contract closing at 2808 yuan/ton, down 3.7%. Asphalt futures main 1906 contract closing at 3210 yuan/ton, down 1.17%. PTA futures main 1905 contract closing at 6406 yuan/ton, down 1.11%.

Li Lei, a chemical researcher at Meyer Futures, said that on the evening of the 25th, US President Trump issued a tweet calling for OPEC to ease production cuts. Affected by this, crude oil futures prices fell sharply, and fuel oil, asphalt and other futures varieties also fell to varying degrees. Tian Yujia, a chemical analyst at Dongwu Futures, added that Russia’s weak capacity to reduce production also poses a drag on the crude oil market.

From a deeper point of view, Li Lei believes that “Trump’s statement is only the cause of the lower oil price, and the two factors of the increase of U.S. commercial crude oil stocks for five consecutive weeks and the weakening of the monthly difference in crude oil contracts are the internal causes of the change of oil prices from rising to falling.”

Short-term fear of continued callback

“The future crude oil market fundamentals will be dominated by three factors: OPEC production reduction, U.S. shale oil production increase and weak demand.” Li Lei said that OPEC maintained a high level of production reduction, combined with instability in Libya and Venezuela, and the first half of OPEC production reduction will provide support for oil prices. Although shale oil production in the United States has maintained a low growth rate recently due to pipeline constraints, it is expected to accelerate in the second half of the year as pipelines are gradually put into operation, which will have an impact on the crude oil market. In addition, the slowdown of global economic growth may also affect the prospects of crude oil demand. Some institutions have lowered their expectations of crude oil demand growth in 2019, putting long-term pressure on the oil market.

Tian Yuejia said that due to the rapid growth of shale oil production, the production of light oil soared, and the current U.S. gasoline inventory is at the top of the historical range, the U.S. crude oil market focuses on the process of product oil de inventory. Brent crude oil market needs to pay attention to the reduction of Saudi Arabia and Russia. If Saudi Arabia maintains low production, the crude oil supply will have a gap when the peak consumption season comes.

For the future market, Tian Yujia said that the short-term crude oil prices will maintain a pullback trend. However, in the medium and long term, the contradiction between supply and demand of light and heavy oil may be difficult to solve, and crude oil can still be used as a multi-head configuration.

Li Lei also said that although OPEC production cuts provide power for oil prices to rise, because of weakening expectations on demand side and increasing production of shale oil in the United States, production cuts have not been smoothly transmitted to the inventory side, so the U.S. commercial crude oil stocks have increased for five consecutive weeks, and it is expected that short-term oil prices will maintain a retracement trend, but the long-term upward trend is still expected to remain volatile. In terms of operation, under the background of short-term weakness of crude oil, chemical futures, such as asphalt and PTA futures, which have high correlation with oil prices and weak fundamentals, will face downward pressure and can be short-term allocation.

According to the latest data released by the General Administration of Customs, in January 2019, China imported 12.33 million tons of power coal (including bituminous coal and sub-bituminous coal, but not lignite, the same below), an increase of 570,000 tons, an increase of 4.85%, an increase of 8.33 million tons annually, an increase of 208.25%.

Imports in January 2019 amounted to $933,341,000. As a result, the unit price of imports was $75.7 per ton, an increase of $11.53 per ton from the previous year, an increase of $2.65 per ton from the previous year.

In January 2019, China imported 12.85 million tons of lignite, an increase of 2.65 million tons, an increase of 25.98%, and an increase of 10.1 million tons annually, an increase of 367.27%. Imports amounted to $546.153 million, an increase of 2.3% over the same period last year.

According to Reuters in Singapore, Asia’s largest oil consumers are exporting large quantities of refined oil to the region, as refining output exceeds consumption in the context of slowing demand growth, putting pressure on industry profits.

Since 2006, the Asia-Pacific region has been the largest oil consumer in the world, driven by the traditional industrial consumer countries Korea and Japan, as well as the rising economic powers China and India. However, the over-construction of refineries and the slow growth of demand have led to a substantial increase in the export of refined oil products from these demand centers.

The surge in refined oil exports, coupled with a 25% surge in crude oil prices so far this year, has reduced the profit margin of the Asian benchmark Singaporean refinery from more than $11 a barrel in mid-2017 to just over $2 a barrel at present.

INEOS Styrolution, the world’s leading supplier of styrene products, has recently announced that it has obtained the approval of relevant regulatory and legal bodies to complete the acquisition of Doodle polystyrene production base. The acquisition was agreed on August 31, 2018, including the acquisition of Foshan Production Base in South China and Ningbo Production Base in Zhejiang Province in East China, as well as the acquisition of two sales offices in Guangzhou and Shanghai. The annual production capacity of each production base is as high as 200,000 tons.

The acquisition follows INEOS Styrolution’s “triple transfer” development strategy, which not only allows us to increase production plants in key Asian markets, but also to enter the domestic market through localized production.

“We will continue to implement our development strategy.” Kevin McQuade, chief executive of INEOS Styrolution, said. “This is the second successful acquisition in the Asia-Pacific region after K-Resin business acquisition and integration. We also define the Asia-Pacific region as the business focus growth area of INEOS Styrolution.

Steve Harrington, president of INEOS Styrolution Asia Pacific, was heartened by the new opportunities offered by the acquisition: “This acquisition not only enables us to better serve existing customers in the Asia Pacific region, especially the household appliances and electronics industries, but also provides us with opportunities to explore the Chinese market.”

INEOS Styrolution

INEOS Styrolution is a leading global supplier of styrene products, focusing on styrene monomers, polystyrene, ABS general materials and styrene special materials. With excellent production equipment and over 85 years of rich experience, INEOS Styrolution can provide the best quality solutions to help customers win competitive advantage in the market and achieve success. The company provides styrene products for many industries, including automotive, electronic, household appliances, construction, health care, toys/sports/leisure and packaging. In 2018, the company’s sales reached 5.4 billion euros. INEOS Styrolution has about 3,500 employees and 20 production bases in 10 countries.

Data released by the General Administration of Customs on Saturday showed that China’s imports of scrap metals fell 32.7% to 330,000 tons in January from a year earlier.

Among them, the import of copper scrap decreased by 11.5% to 180,000 tons, and the import of aluminium scrap decreased by 34.4% to 120,000 tons.

In January, the import of alumina increased by 5.4% to 80,000 tons, while the export of alumina increased by 142,864 tons.

Due to the slow recovery of terminal demand of ethylene glycol, the imbalance between supply and demand of ethylene glycol is difficult to change in a short time. In this case, supply pressure is still the dominant factor in the ethylene glycol market, and ethylene glycol will continue to find the bottom.

Obvious supply pressure

Oversupply is the main reason why the price of ethylene glycol has continued to weaken since the fourth quarter of last year. At present, the problem of oversupply still exists.

First, in terms of domestic supply, as of February 15, the start-up rate of ethylene-based ethylene glycol production in China was 83.5%, up 3.3 percentage points from the previous week; the start-up rate of coal-based ethylene glycol production was 84.6%, up 16.3 percentage points from the previous week. The overall starting load of ethylene glycol in China is 85%, which is 8.4 percentage points higher than the previous week. With the increasing start-up load of ethylene glycol, domestic market supply will further increase, and the problem of oversupply will further aggravate.

Secondly, on the import side, due to the abundant supply of domestic ethylene glycol, the price has always been at a low level, and the arbitrage window for ethylene glycol imports has always been closed. Up to now, the price of Imported Ethylene Glycol discounted RMB has risen to about 200 yuan/ton of spot price in East China. Demand for high-priced imports has declined, and imports of ethylene glycol have declined since the fourth quarter of last year. Looking ahead, the ethylene glycol plants in India and Thailand will be overhauled, the international supply will be tightened, and the price gap between internal and external markets is expected to expand, thus further restraining imports.

Third, due to poor downstream consumption, ethylene glycol port inventory is high, creating a new high in recent five years. As of February 14, the inventory of ethylene glycol ports in East China was 1.066 million tons, up by 460,000 tons, or 75.91%, from the peak of ethylene glycol at the beginning of October last year. Among them, Zhangjiagang’s ethylene glycol inventory was 751,000 tons, up 438,000 tons from the beginning of October last year, up by 139.94%; Taicang’s ethylene glycol inventory was 115,000 tons, up by 67,000 tons from the beginning of October last year, up by 6.48%; Ningbo’s ethylene glycol inventory was 93,000 tons, down by 44,000 tons from the beginning of October last year, down by 4.12%.

Overall, although the arbitrage window is closed and imports are declining, it is difficult to change the situation of domestic supply pressure. At present, the domestic ethylene glycol start-up load has increased, and the inventory has reached a new high in the stage. The effect of oversupply on the price of ethylene glycol is still obvious, and the market needs time to inventory.

Cost Support Appearance

The rebalancing process of global crude oil supply and demand is expected to accelerate due to the implementation of OPEC output reduction exceeding expectations. Influenced by market factors, international crude oil has been rising recently. In this case, the cost focus of ethylene to ethylene glycol will be shifted upwards, which will provide strong support for ethylene glycol which is currently in a slight profit state.

Slow recovery of demand

After the Spring Festival, the polyester enterprises which had been repaired in the earlier period resumed production one after another. At present, polyester inventory is at a low level, polyester enterprises urgently need to increase production to meet the upcoming peak consumption season. It should be noted that due to the shortage of terminal orders, the process of terminal weaving resumption has slowed down this year, and the willingness of enterprises to take goods is not strong. Therefore, the warming of demand may be less than expected, thus delaying the process of ethylene glycol de-inventory.

Forecast for future market

In summary, due to the slow recovery of demand, the imbalance between supply and demand of ethylene glycol is difficult to change. In this case, excessive supply pressure is still the dominant factor in the price of ethylene glycol. At present, the inventory is high, and the disadvantaged pattern of ethylene glycol is still difficult to change in a short time.