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.