As the cash flow of the equipment is restored, the willingness of enterprises to focus on maintenance has declined. At the end of June, many units have been restarted. Even though the current downstream demand is still acceptable, there is some support for ethylene glycol. However, due to the rapid recovery of short-term supply, the margin of supply and demand has weakened. Suppressing the market mentality, ethylene glycol operates under pressure.
Centralized restart of equipment, supply pressure gradually revealed
In terms of new device production capacity, the growth rate of ethylene glycol production capacity has slowed down compared with the previous two years, but it is still in the production capacity expansion cycle. In the first half of the year, a total of 2.7 million tons of production capacity was put into production, including the 900,000-ton unit of Shenghong Refining and Chemical, Hainan Refining 800,000 tons and Sanjiang Chemical 700,000 tons EG and 300,000 tons EO. Since there is currently no EO downstream supporting equipment, it is still mainly producing EG. As new equipment is put into operation, the domestic production capacity base will be further increased.
Domestically, supply has rebounded rapidly and pressure has gradually emerged. Due to the intensive maintenance of ethylene glycol units in the early stage, the supply has shrunk significantly, coupled with the rapid decline in upstream raw material prices, the upstream profits of the industrial chain have been transferred to the downstream, and the cash flow of ethylene glycol units has been significantly restored, resulting in the current lack of willingness of enterprises to overhaul and switch production. According to recent changes in equipment, many units have been restarted at the end of June. For example, two units of Zhejiang Petrochemical, Hainan Refining and Chemical, and Satellite Petrochemical have all restarted one after another. The supply has rebounded rapidly and significantly. As of June 29, the operating load of ethylene glycol was 64.31%. , a week-on-week increase of 6.44%. As the early restart of the device further increases the load, it is not ruled out that the supply of ethylene glycol will increase further. In addition, according to the new device production plan, there are still 1.8 million tons of new production capacity planned to be put into production in the second half of the year. If the new device is put into production, supply pressure may increase again.
Overseas, import supply stocks are expected to increase slightly. According to customs import and export data, my country’s ethylene glycol import volume in May was 503,900 tons, a month-on-month increase of 17.72%, and a year-on-year decrease of 8.66%. The cumulative import volume from January to May was 2.141 million tons, a year-on-year decrease of 26.78%. my country’s ethylene glycol export volume in May was 3,600 tons, a month-on-month decrease of 33.84%, and a year-on-year decrease of 20.65%. The cumulative export volume from January to May was 41,300 tons, a year-on-year increase of 118.66%. In the first quarter, overseas units had more equipment maintenance due to efficiency issues, resulting in my country’s lower import volume in March and April. As overseas equipment maintenance was completed and restarted in the second half of March, ethylene glycol imports increased month-on-month in May, and in the later period A further slight increase is expected. According to the operation status of overseas devices, the start-up of mainstream overseas devices has remained at a high level in the second quarter, and supply has rebounded significantly. According to the recent arrival volume data, the recent arrival volume has increased significantly compared with the previous period, and the arrival of U.S. goods and Iranian goods has Hong Kong is relatively concentrated, and import stocks are expected to increase slightly.
Polyester production capacity and output have increased, and overall demand is acceptable
As of the end of June 2023, my country’s new polyester production capacity this year has reached 5.56 million tons, which is slightly lower than the new production capacity released in 2022. The growth rate of production capacity is impressive. Specifically, in the first half of the year, a lot of new production capacity was put into operation for filament yarn and bottle flakes. Among them, a total of 3.11 million tons of new installations for filament yarn were put into operation, a total of 1.95 million tons of new installations for bottle flakes were put into operation, and 200,000 tons of film and staple fiber were put into production respectively. tons and 300,000 tons of new equipment were put into operation. According to the 2023 polyester plant production plan, there is still a lot of polyester production capacity planned to be put into production in the second half of the year, with a total of 4.58 million tons of production capacity planned to be put into production. Among them, filament and bottle flakes are the main ones, and short fiber production capacity is smaller. Overall, if new polyester devices are put into operation, the demand for ethylene glycol will further increase.
After the cash flow of the equipment was restored, the polyester plant continued to operate at high load. Due to the sharp and rapid increase in the price of raw material PTA in March, the cash flow of the polyester segment was greatly squeezed. Starting from late March, polyester factories announced the implementation of joint production cuts, mainly filament and short fiber. With the reduction of polyester load, , the margin of supply and demand has improved, coupled with the rapid weakening of raw material prices, the profits of the industrial chain have shifted from upstream to downstream, and the cash flow of most products in the polyester link has been significantly restored, increasing the willingness to start polyester production. After May Day, the polyester load picked up significantly and continued to run at a relatively high level. According to CCF statistics, polyester production averaged 92.76% in June, a month-on-month increase of 4.25%. Even though it is currently the traditional seasonal off-season of the year, the operating load of polyester can still remain at a high level. This is mainly because the cash flow of most polyester products is at or above the break-even line or at a small profit level. In addition, the current inventory level pressure is acceptable, which is obvious. It is better than last year, which increases the willingness to start operations of polyester factories.
There will still be some support for demand in the later period, but we need to pay attention to potential negative feedback from terminal demand. Since it is currently the traditional off-season, the performance of terminal orders is average, and the inventory of weaving factories has accumulated, coupled with the interference of high temperature weather, we cannot rule out the possibility that the starting load of weaving factories will weaken slightly in the later period. At that time, we need to pay attention to the negative feedback to the upstream of the industrial chain. In addition, the export volume of polyester increased significantly in the first half of the year, especially the export volume to India was considerable. Due to the implementation of India’s BIS policy from July, my country’s exports to India may face a significant shrinkage, which will in turn create a certain negative impact on polyester. Overall, polyester loadWe have slightly lowered our expectations, but overall demand still has some support.
To sum up, although the current downstream polyester production remains at a high level and the demand for ethylene glycol is acceptable, as the cash flow of the ethylene glycol unit has been restored in the near future, more domestic units have restarted, and the supply has rebounded rapidly and significantly, and there is also an increase in overseas supply. It is expected that ethylene glycol inventory will turn from a significant destocking in the early stage to a slight accumulation. The short-term supply and demand margin will weaken rapidly, suppressing the market mentality. It is expected that ethylene glycol will mainly fluctuate at low levels.