Supply continues to put pressure on the medium and long-term trend of ethylene glycol is still weak

Driven by cost, ethylene glycol futures prices will continue to run warmer in the short term, but the increase in domestic supply and imported sources will strongly suppress ethylene glycol futures prices.
As the demand side has not yet seen a significant positive situation, the medium and long-term trend of ethylene glycol is still weak.

Entering the second quarter, the performance of the terminal market "Golden Three and Silver Four" was not as good as expected, and the expected launch of new domestic equipment continued to put pressure on the ethylene glycol futures price.

The ethylene glycol main contract futures price fluctuated all the way and fell to 4700 yuan/ton.

Many new devices are planned to be put into production

Starting from March, the comprehensive operating rate of domestic ethylene glycol plants has increased to more than 65%.

The restart of some early-stage maintenance devices at the end of April further increased the operating rate of ethylene glycol.
The domestic comprehensive daily operating rate once exceeded 70%, a record of 2020 New high since the end of March.

In 2021, the pace of large-scale expansion of domestic ethylene glycol production capacity will continue.

There will be nearly 6 million tons/year new equipment planned to be put into operation throughout the year, and most of the new equipment will be put into operation in the first half of the year.

May is the traditional maintenance season for ethylene glycol plants in China.

It is currently known that coal plants with a total capacity of 1.

　　Terminal demand is weaker than expected

　　The low inventory of various varieties in the early stage and the relatively considerable processing profit have made polyester companies more willing to start operations, and domestic polyester plants have been operating at a high level of more than 90% for a long time.

As of May 8, the domestic polyester comprehensive daily operating rate was 91.
3%, an increase of 6.

　　Judging from the conventional situation in previous years, the terminal weaving industry will usher in a round of peak consumption season from March to April due to factors such as summer orders.

In 2021, although the domestic terminal weaving market ushered in the traditional peak season of "Golden Three Silver Four", its actual performance was weaker than the market consensus, especially in overseas markets that were previously "high hopes".

　　The intensification of the epidemic in India has made the market full of expectations for the return of overseas weaving orders, but this has not happened as of the end of April.

Due to the lower than expected terminal demand, the inventory pressure on the weaving end has gradually increased, the operating rate of looms has declined, and the inventory of various polyester varieties has also increased to varying degrees.

　　The port enters the stage of accumulating storage

　　Affected by factors such as the overhaul of overseas installations, the unexpected shutdown of US installations due to cold weather, and the opening of the Sino-European arbitrage window, domestic ethylene glycol imported cargoes in 2021 will be at a low level of about 150,000 tons for a long time.

At the same time, the Yangtze River Channel will be affected by weather from time to time.
The closure of voyages has led to a further decline in actual arrivals, and the inventory of ethylene glycol in East China ports continues to remain low.

　　With the restart of production of unexpected shutdown devices in the United States and the completion of the overhaul of glycol devices in other overseas countries and regions, domestic glycol imports are expected to increase significantly.
Data show that in late April, the planned arrival of ethylene glycol at East China Port was once again at a relatively high level of over 200,000 tons for two consecutive weeks.
As the polyester load is facing downward pressure, the demand for ethylene glycol may fall, which will make it difficult to further increase the amount of ethylene glycol port cargo.
In the case of expected increase in arrival cargo, the future ethylene glycol port inventory is expected Will enter the accumulation stage.

　　Strong cost support

　　After the end of the Spring Festival holiday, the price of ethylene glycol continued to rise sharply, so that the profits of various domestic processes of ethylene glycol processing have been significantly restored, and the processing fees of oil and coal process ethylene glycol once increased to a new high since 2019.
But the good times did not last long.
With the continuous decline in the price of ethylene glycol and the increase in the price of raw materials, the profit of ethylene glycol processing was significantly compressed.
Among them, the processing fee of coal-to-ethylene glycol has entered the negative range again since late April.
As of May 8th, the domestic CFR Japan median price was 600.
5 US dollars/ton.
It is estimated that the domestic oil-based glycol processing fee is about 131.
59 yuan/ton, which is a sharp drop of 1,633.
12 yuan/ton from the previous high, compared with the same period in 2020.
A decrease of 608.
01 yuan/ton; the average price of thermal coal in major domestic ports is 840 yuan/ton.
It is estimated that the domestic coal-to-ethylene glycol processing fee is about -602 yuan/ton, which is a significant drop of 2562.
2 yuan/ton from the previous high.
In the same period of 2020, an increase of 147.
6 yuan/ton.

　　Although competition among enterprises intensifies during capacity expansion, it will be a high probability event that enterprise processing profits are compressed, but if the ethylene glycol processing fee remains in the negative range for a long time, the enterprise's willingness to continue production due to its own normal operation will be significantly reduced.
The supply of ethylene glycol will shrink, which will push up the price of ethylene glycol and rebalance the supply and demand of the ethylene glycol market.
In the context of strong international oil price fluctuations, we believe that the domestic ethylene glycol processing fee has limited room for further compression, and the cost of ethylene glycol is strongly supported.

　　To sum up, although the current polyester plant starts to maintain a high level, the demand for ethylene glycol is temporarily stable, but the terminal weaving market demand is less than expected, resulting in a decline in the start of the loom.
At the same time, the start of the polyester end will also face downward pressure.
The demand side lacks obvious positive support for the time being.
Although May is the traditional maintenance season for domestic glycol plants, the restart of some of the preliminary maintenance devices offset the supply shrinkage caused by the plant maintenance, and the newly commissioned devices further boosted the domestic glycol supply.
In the short term, after the processing fee has been compressed to a low level again, changes in raw material costs have become the dominant factor affecting the price trend of ethylene glycol.
Under the recent strong trend of international crude oil prices and coal prices, it is expected that ethylene glycol futures prices will remain Warmer operation.
However, the supply pressure brought by the later production of new ethylene glycol devices and the increase in imported cargoes is still relatively large, and it is expected that ethylene glycol will not escape the situation of weak operation in the medium and long term.
(CITIC Construction Investment Futures)

　　Transfer from: Chemical Network

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