Driven by negative profits, the output of coal-based ethylene glycol has declined, and the operating load has remained at a low level. In addition, the listing of short fiber futures has pushed up the polyester textile sector and the ethylene glycol port inventory has been well digested. Therefore, you can try to participate in the ethylene glycol 2101 contract in the fourth quarter and place multiple orders on dips.
The cost-side support is relatively strong
Despite the second wave of epidemics, good news continues to come out of vaccine development, and there is progress in the lifting of blockades between countries and the resumption of flights. Good expectations, crude oil prices have been oscillating recently, and there is support on the cost side of oil-to-ethylene glycol. In addition, my country has restricted the import of coal from Australia. Coal prices have recently increased, and there is also support on the cost side of coal-to-ethylene glycol.
Only Rongxin Chemical’s 400,000 tons/year coal-to-ethylene glycol production capacity was put into operation in 2019, which is far lower than the 3.27 million tons/year production plan. It is expected that 4 million tons/year of coal-to-ethylene glycol production capacity will be put into operation in 2020. However, so far, due to downstream profit concessions and rising coal prices after the deep slump in crude oil prices, coal-to-ethylene glycol profits have shrunk. Against the background of declining coal-based competitiveness, only 800,000 tons/year of new production capacity was added.
The operating rate of the industry continues to decline
In the first half of 2020, crude oil prices fell deeply, coupled with the increasingly serious overseas epidemic, chemical products fell off a cliff, and in the coal industry In the absence of significant market changes, the profits of the coal chemical industry have been greatly compressed. Coal-to-ethylene glycol has been in a state of loss for a long time, and equipment maintenance and even shutdowns are common.
Data show that the total domestic ethylene glycol production capacity is 14.535 million tons/year, of which the total coal-to-ethylene glycol (including methanol production) production capacity is 5.19 million tons/year (the addition of Sinochem Quanzhou’s 50 10,000 tons/year, Shanxi Woneng’s 300,000 tons/year), accounting for one-third of the supply side of the world, and the rest are mostly made of ethylene. As of October 2020, the gross profit of coal-to-ethylene glycol is -1516 yuan/ton, the gross profit of methanol-to-ethylene glycol is -1460.5 yuan/ton, the gross profit of ethylene-to-ethylene glycol is -200.75 US dollars/ton, and the gross profit of naphtha-to-ethylene glycol is -1460.5 yuan/ton. The gross profit margin of glycol is US$23.51/ton. Most manufacturers have suffered serious losses for a long time, which will inevitably lead to a contraction in supply.
On October 9, the operating load of the ethylene glycol industry was 59.73%, of which the operating load of coal-based ethylene glycol was 50.69%, down 1 percentage point from the previous week. Tianjin Petrochemical’s 100,000-ton unit was shut down in early October, and the restart time is to be determined. In the second half of October, there are still plans for equipment maintenance. Among overseas installations, two installations in the United States were shut down due to hurricanes, and their restart plans were also delayed.
Port inventories have been significantly digested
Affected by the epidemic, garment exports have been affected, the operating load of the polyester industry has dropped, market sentiment has become more pessimistic, and prices have fallen into depression. However, the prices of plastics and other chemical products are relatively strong due to the epidemic and industrial concentration advantages. Therefore, bottle flakes, which are usually used as substitutes, are favored due to their price advantages. There is a saying that “bottle flakes replace everything”. At the same time, the performance of short fiber futures after their listing also proves that the polyester market is recovering and the demand for ethylene glycol is not as weak as imagined. At present, mainstream textile countries represented by India and Southeast Asia are unable to effectively start production. However, my country’s epidemic prevention and control is good, and overseas orders have begun to flow domestically.
In August, ethylene glycol inventories hit a record high, but prices were running above the support level, indicating that the suppressive effect of high inventories was marginally weakened. At this time, the impact of inventory decline on prices is more positive and sensitive. Data show that ethylene glycol port inventory has decreased from 1.4 million tons in August to 1.28 million tons in October, a rate of nearly 10%. Ethylene glycol ports are destocking faster than expected.
Conclusion
In general, the entire ethylene glycol industry is in a loss-making situation, and supply has shrunk significantly; global textile orders have flowed to China, and demand has exceeded expectations; The port has entered the process of destocking, with a decline of nearly 10% since August, and the ethylene glycol market is ushering in a long opportunity. Specifically, choose the 2101 contract, go long on dips, and do rolling operations. The trading time is set from October to November, the position opening range is set at 3900-4000 yuan/ton; the target point is set at 4600 yuan/ton; the stop loss point is set At 3800 yuan/ton. </p
