Introduction: Crude oil, naphtha, ethylene, and thermal coal prices continue to strengthen, with Brent crude oil standing above the $50/barrel mark, while thermal coal The price has risen to the current 880 yuan/ton, an increase of 38.15%. The rising cost has provided sufficient basis for the strong upward trend of ethylene glycol prices. Domestic ethylene glycol companies maintain low-load operations, and planned production units continue to be delayed, coupled with delayed arrivals at terminals; downstream polyester production remains high, rigid demand is stable, and the supply and demand margin is relatively strong, which also provides support for the rise in ethylene glycol prices. Raw material prices continue to rise:
Figure 1 International crude oil and domestic ethylene glycol price trends
Source: Longzhong Information
Figure 2 cf Japanese naphtha and domestic ethylene glycol price charts
Source: Longzhong Information
Figure 3 Northeast Asia ethylene and domestic ethylene glycol price trends
Source: Longzhong Information
In December, the domestic ethylene glycol market reversed its decline and prices rose strongly. From a logical point of view, rising costs + a strong fundamental supply and demand margin are the main driving forces for price increases. The prices of crude oil, naphtha, ethylene, and thermal coal continue to strengthen. Brent crude oil stands above the US$50/barrel mark, and the cost of naphtha equivalent to ethylene glycol has moved up US$79.42/ton, and the cost of ethylene glycol equivalent to ethylene has increased. The price of thermal coal has risen to the current level of 880 yuan/ton, an increase of 38.15%, which is equivalent to an increase in the cost of ethylene glycol by around 820 tons. The rising cost has provided sufficient fuel for the strong rise in ethylene glycol prices. Base.
The increase in supply is limited, and the demand for downstream polyester is stable:
Figure 4 Domestic E2 Alcohol production trend chart
Source: Longzhong Information
According to Longzhong Information statistics, in mid-February 2020, Hengli Petrochemical’s 1.8 million-ton ethylene glycol unit and Zhejiang Petrochemical’s 750,000-ton ethylene glycol unit Devices have been put into production one after another, announcing that domestic polyester giants are further extending their reach to upstream ethylene glycol. As of press time, the newly added ethylene glycol production capacity during the year totaled 4.75 million tons, an increase of 42.15% compared with last year. The average annual operating capacity in 2020 was 58.3%, and the current operating rate is as low as 52.81%. The idle capacity situation is increasing day by day, and the output growth rate is only 8.45% compared with last year.
Figure 5 Domestic polyester production trend chart
Source: Longzhong Information
According to statistics from Longzhong Information, domestic polyester production in 2020 It will be around 52.66 million tons, an increase of 5.36% from last year. Judging from the monthly data, only the domestic polyester output data in February, March and April of 2020 are lower than the same period in 2019, and the remaining months are higher than the same period in previous years. The trend of “low at first and then high” in output is very obvious. The first half of the year experienced a replenishment of polyester output in the second quarter, and the overall output data did not change much compared with the same period last year. In the second half of the year, domestic polyester output data increased significantly. According to Longzhong statistics, the domestic polyester industry output data in the second half of 2020 was around 28.5842 million tons, an increase of 2.6684 million tons compared with the same period last year, an increase of more than 10%.
Summary: On the cost side, crude oil performed strongly, naphtha and ethylene prices remained strong, while coal prices were supported by tight supply and stable demand, and prices also The performance was strong, and the cost side of ethylene glycol remained strong. On the supply side, new production capacity has been put into production but has been delayed. In terms of terminal inventory, the January arrival plan is stable. Due to the impact of the early shipping closures, the overall inventory is expected to be low at first and then high. From the demand side, polyester production is expected to start in January and there will be no significant load reduction. From the perspective of supply and demand balance, it is expected to be in micro balance/destocking. Overall, the fundamental performance of ethylene glycol is acceptable, and the price will maintain a high trend. (The market risk point in the later period will be systemic risks in the market under the counterattack of overseas epidemics.)
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