Ethylene glycol is unsustainable

The re-production of ethylene glycol plant and the warming of import profits make it possible to adjust the existing prices in a certain direction. The prudent purchasing in downstream polyester industry makes it difficult to strengthen spot prices. Overall, ethylene glycol will show a weak trend of operation in the near future.

Ethylene glycol supply or recovery

From the plant point of view, compared with the first half of the year, the overall load of domestic ethylene glycol plant has returned to a reasonable range, and the current overall load of the plant is around 65%. Among them, the coal-based ethylene glycol plant returned to about 60% in the second quarter, and there was no obvious adjustment; the oil-based ethylene glycol plant did not reproduce the sharp upward trend in the same period in 2018, but remained stable at about 70%. After the recent overhaul of the device, some devices will be restarted in September, which will have a certain impact on the overall supply of the market.

On the import level, the import volume of ethylene glycol in July was 810,000 tons, up 14.09% year on year; from January to July this year, the cumulative import volume of ethylene glycol was 5.8 million tons, down 0.25% year on year. Considering the frequent typhoons in South China in recent years, the import of ethylene glycol will be affected to a certain extent, and the shipping efficiency will be reduced. At present, the total inventory of ethylene glycol in East China is 813,800 tons, which is at the normal level in the same period in previous years from the absolute quantity point of view. Inventory driving is not obvious, but from the point of view of import price difference, with the rise of the price of ethylene glycol, the import price gap continues to warm up. Later, if the influence of typhoon factors weakens, upward pressure on the price of ethylene glycol will gather rapidly, and the price recovery of ethylene glycol will end.

It is difficult for downstream demand to improve fundamentally

With the expected improvement in the supply of ethylene glycol, the downstream polyester and terminal apparel textiles have not improved. Although the stock of terminal grey fabric has declined to some extent, the stock scale is still on the high side of the same period in previous years. From the feedback of the downstream survey, the production orders of foreign trade apparel enterprises are still relatively limited, the available storage capacity of many material warehouses is very low, and the accumulation of raw materials is serious. In the context of Sino-US trade frictions, many manufacturers’expectations for the future are declining. The persistence of terminal recession also makes polyester enterprises very cautious about raw material purchasing and equipment load adjustment.

After a capacity expansion cycle in 2018, the current capacity of polyester is 56 million tons. In the first half of 2019, the capacity of polyester plant increased by 1.23 million tons per year. In the second half of the year, the production capacity of polyester plant is expected to increase by 3.45 million tons per year, and the actual production capacity is about 2.95 million tons per year. Among them, 1.25 million tons per year were put into operation in the third quarter and 1.7 million tons per year in the fourth quarter. In the first half of 2019, the output of polyester increased rapidly, with the total output of 24 million tons from January to June, an increase of 8.4% over the same period last year. The overall cash flow of polyester has been greatly reduced, and the profit differentiation of products is not obvious. With the decline of the policy effect of the “ban on abolition”, the profit of bottle flakes declined sharply, and the profit of filament decreased slightly compared with last year. It is expected that the polyester load will continue to adjust and the growth rate of ethylene glycol demand will continue to decline in the following time.

Summary and Reflection

On the cost side, crude oil prices are easy to fall and difficult to rise, which makes the support below the price of ethylene glycol not strong. In addition, the re-production of ethylene glycol plant and the recovery of import profits make the existing prices have a certain adjustment space. At present, ethylene glycol inventory is at a neutral level, and prudent purchasing in downstream polyester industry makes it difficult to strengthen spot prices. Overall, ethylene glycol will show a weak trend of operation in the near future.