In the first half of 2020, the domestic ethylene glycol spot market plunged from a high level and entered a long bottoming stage. The sudden public health incident in the first quarter and the black swan of the collapse of OPEC+ crude oil production cuts caused the ethylene glycol market to experience the coldest winter in history. In the second quarter, the mismatch between supply and demand kept port inventories high, and the market entered a period of shock and bottoming.
Data source: Jin Lianchuang
In the first quarter, negative events followed one after another Then, the ethylene glycol market experienced a polar reversal
Just after New Year’s Day, due to long-term destocking of the ethylene glycol market in the early stage and frequent port closures, ethylene glycol stocks dropped to a historical low of 334,000 tons. At the same time, the conflict between the United States and Iran has fermented, driving international crude oil prices to strengthen. Cost support has been beneficial and the supply exceeds demand. The spot negotiation price of ethylene glycol has risen all the way to 5,400 yuan/ton. With high profits, the impetus for the commissioning of new units has increased. New units of Inner Mongolia Rongxin with 400,000 tons, Zhejiang Petrochemical with 750,000 tons, and Hengli Petrochemical with 900,000+900,000 tons have been put into operation one after another.
Back from the Spring Festival, public health emergencies have accelerated the transformation of supply and demand logic in the ethylene glycol market. The chemical fiber industry chain has encountered many problems such as difficulty in resuming work, poor logistics, and inventory backlog. Insufficient downstream demand for ethylene glycol coupled with the release of new production capacity, the port inventory once again accumulated to one million tons in just three months, with the inventory increase reaching 201.2%. In March, when the overseas epidemic broke out and the OPEC+ production reduction negotiations broke down, international crude oil once fell into negative territory. Ethylene glycol has been in a unilateral downward trend throughout the month due to cost collapse. The spot negotiation price once fell to 2,875 yuan/ton, a drop of 47.48% from before the holiday. The collapse of costs has resulted in significant profit losses for domestic coal-processing routes, forcing domestic coal-processing enterprises to shut down for large-scale maintenance. The coal production operating rate once dropped to 33.27%, and the operating load has almost bottomed out.
In the second quarter, the largest crude oil production reduction in history occurred. The cost of ethylene glycol supported the contradiction between supply and demand, and it was difficult to get out of the shock range
Entering the second quarter, OPEC+ renegotiated the 9.7 million barrel crude oil production reduction agreement, and there was good news on the cost side, driving the ethylene glycol futures market to stop falling and rebound. However, the contradiction between supply and demand for ethylene glycol has not improved as much as expected. The loss of domestic equipment maintenance has been filled by new production capacity. After the downstream industry entered the traditional off-season, polyester production and sales dropped significantly, and the enthusiasm for purchasing raw materials was not high. The weaving industry is also facing high inventory and weak Due to the state of demand, it is difficult to further increase the operating load. The contradiction between supply and demand is slowly improving, leaving port inventories above 1.2 million tons for a long time.
At the end of the second quarter, after the international crude oil price hit the US$40 mark, the market had doubts about the continued rise of crude oil. At the same time, the continued fermentation of public health incidents drove the market’s risk aversion to return again; and due to the Due to the impact of the increase in ethylene glycol storage fees in some reservoir areas, the short-term market has a strong intention to reverse arbitrage operations, and the spot market is facing severe selling pressure. The ethylene glycol market lacks momentum to rebound and is difficult to get rid of the low volatility pattern.
Trend forecast for the second half of 2020
Through the above analysis we can It can be seen that the domestic PTA market opened high and then declined in the first half of 2020. The domestic ethylene glycol market had a good start at the beginning of the year. However, after the Spring Festival, as negative factors such as macro, cost, and supply emerged one after another, the ethylene glycol market fell to new lows, and It has been in the grinding process for a long time.
From a supply perspective, in the first half of the year, new units of Inner Mongolia Rongxin, Hengli Petrochemical, and Zhejiang Petrochemical were put into operation, adding a total of 2.95 million tons of new production capacity. In the second half of the year, there are still new units planned to be put into operation such as Xinjiang Tianye, Woneng Chemical, Sinochem Quanzhou, and Yanchang Petroleum. If all new units can be put into operation within the year, the domestic ethylene glycol production capacity will reach 15.766 million tons, and the output is expected to reach 8.5 million Ton.
From the perspective of imports, the number of shipments arriving in Hong Kong from January to May has increased compared with the same period last year, and we have not yet heard of large-scale maintenance plans for foreign equipment. It is expected that the import volume this year will be Reaching more than 10 million tons.
From the demand side, the downstream polyester production capacity is expected to reach 64.775 million tons during the year, with output reaching 53.1 million tons. Ethylene glycol is consumed at a ratio of 0.335, and the demand is expected to be 17.7885 million tons. It can be seen that ethylene glycol may enter a stage of overcapacity in 2020.
From the current perspective, the supply side of the ethylene glycol market will most likely remain loose in the second half of the year, and the supply of goods arriving at the port will not decrease. The destocking of port inventory will be a slow process. ; In addition, the epidemic incident during the year has a long-lasting impact, and the traditional boundaries between low and peak seasons have been broken. Some weaving manufacturers have brought forward their autumn and winter orders, and the peak seasons of the Golden Nine and Silver Ten years may not be as expected. Moreover, there is still uncertainty about the second outbreak of the epidemic in the autumn and winter. In the second half of the second half of the year, The alcohol market has limited room for rebound, and the resistance near 4,200 yuan/ton is obvious, making it difficult to overcome throughout the year. </p
