Recently, hawkish comments from Federal Reserve officials that they will further raise interest rates have supported the strength of the U.S. dollar and put pressure on oil prices. Since mid-to-late March, the chemical sector has shown a trend in sync with crude oil. The trends of the two main raw materials have clearly diverged. The strong strength of PTA is in sharp contrast with the continued decline of MEG.
Removing the library is relatively difficult
While the trend of downstream polyester products followed the rise of PTA, due to the lack of terminal orders and sluggish production and sales, prices rose during the week and volume fell, and the pressure of inventory accumulation reappeared. Ethylene glycol continued to fall to low levels against the backdrop of high port inventories and falling coal prices. Since the beginning of March, the main contract of ethylene glycol 2305 has fallen by nearly 300 yuan/ton, with a minimum of 4117 yuan/ton.
In the spot market, the average price of domestic oil-based ethylene glycol is 4,226.67 yuan/ton, a decrease of 1.90% from the average market price of 4,308.33 yuan/ton at the beginning of the month. On March 10, the spot price of ethylene glycol in the East China market dropped slightly. The spot price of mainstream manufacturers in East China was in the range of 4150-4350 yuan/ton; the spot price of ethylene glycol in the South China market was 4300 yuan/ton; the spot price of mainstream manufacturers in central China was executed The price range is 4,030 yuan/ton; the spot price of ethylene glycol in the North China market is basically stable, and the spot price of mainstream manufacturers in North China is 4,300 yuan/ton.
As of now, the inventory of ethylene glycol at the main port of East China is 1.0305 million tons, which is 39,400 tons compared with the inventory of 1.0698 million tons of ethylene glycol at the main port of East China on March 2. On March 10 last year, the inventory of ethylene glycol at the main port in East China was 950,700 tons. The current inventory is at a relatively high level. The reason is that the pressure for ethylene glycol production is still high. The country initially plans to put into operation 3.8 million tons of new production capacity throughout the year, of which oil-based production will account for 58% and coal-based production will account for 42%. Overseas, India’s IOC and Iran’s BCCO plan to put into production 400,000 tons and 450,000 tons respectively. With the increase in domestic production, although import dependence is expected to drop to around 30%, preliminary calculations indicate that the growth rate of ethylene glycol supply in 2023 is expected to be 6.8%. Even in 2019, when the polyester industry enjoyed considerable profits, there were still no signs of destocking, indicating that the supply side is facing unprecedented pressure. At this stage, ethylene glycol destocking may only rely on factory production reductions. However, there are many ethylene glycol production processes and the production cost gap is large. If production is reduced at the current price, destocking may be relatively difficult.
Polyester load gradually increases
The polyester industry chain as a whole was dominated by an upward trend. The raw material end PTA increased significantly, with PX rising by 1.51% and PTA rising by 3.33%. Most downstream products followed the increase passively, with filament rising by 1.82% and short fiber rising by 1.02%. However, another raw material, ethylene glycol, ended in decline. Judging from the textile terminal data of the industry chain, the recovery of terminal orders is lower than expected. Downstream spinning mills and weaving companies have accumulated their own finished product inventories. There is limited room for continued increase in operating rates. The polyester market must also be wary of the consequences of the terminal recovery being lower than expected. Negative feedback.
The operating rate of pure polyester yarn companies was 83.52%, which was the same as the previous month. At present, the operating rate of pure polyester yarn factories is basically the same as that of the same period in previous years, but the recovery of terminal orders is not as good as expected. Currently, both domestic and foreign trade orders of spinning mills are sluggish. Some spinning mills have begun to accumulate inventory even before the pre-holiday inventory has been exhausted. Downstream Confidence is obviously lacking, and a few spinning mills have reported that if orders continue to not improve, they may reduce production.
To sum up, on the one hand, on the supply side, units such as Satellite Petrochemical, Hengli Petrochemical, and Zhejiang Petrochemical all plan to convert to EO production in the second quarter, and remote supply is expected to shrink. In terms of imports, import volume will decline in March, and port inventories will show slight destocking. The overall pressure on the supply side is limited; on the other hand, on the demand side, the polyester load is gradually increasing. It is expected that the fundamentals of ethylene glycol supply and demand will continue to recover, and the inventory will shift from accumulation to destocking in March. At the same time, ethylene glycol is in a significant loss-making state, and there is a need to repair cash flow. In addition, although the medium-term plan for the commissioning of new ethylene glycol equipment continues to exist, it is logically supported by the expected shrinkage in the short term due to the conversion to EO production, and the ethylene glycol price center is expected to move upward.
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