Ethylene glycol: a weak pattern that is difficult to change in the short term

时间：2024.08.21

According to data from Shengyi Society, on August 16th, the reference price of ethylene glycol was 4571.67 yuan (ton price, the same below). At present, the operating rate of ethylene glycol is relatively high, and the supply pressure is high. Although there is an expectation of recovery on the demand side, the oversupply pattern is difficult to substantially improve in the context of weak terminal markets. Industry insiders believe that the weak pattern of ethylene glycol is difficult to change in the short term.

Price fluctuates repeatedly

In the first half of this year, the ethylene glycol market showed a trend of rising and falling, and then strengthening again; N-type; Fluctuating trend, the price center of gravity has significantly shifted upward compared to 2023. Specifically, the high point of ethylene glycol prices this year occurred on January 31st, at 4747.50 yuan; The low point appeared on May 10th at 4322.50 yuan. After entering the second half of the year, the price rebounded again to 4690 yuan in mid to early July, and began to decline and consolidate again in August.

Zhang Guoliang, an ethylene glycol analyst at Zhuochuang Information, pointed out that the reason for this trend is that after experiencing rapid expansion of ethylene glycol production capacity from 2020 to 2023, there will be less new capacity added in 2024, and the supply pressure will weaken. In addition, downstream demand will remain high, polyester factories will actively stock up, and ports will continue to reduce inventory, driving the price of ethylene glycol to strengthen. But with the price of ethylene glycol soaring to 4600 to 4700 yuan, the profits of production enterprises have been partially repaired, and the increase in production load has brought new incremental pressure, resulting in the price of ethylene glycol still being limited after recovering to a high level.

According to tracking data from Zhuochuang Information, from 2020 to 2023, the ethylene glycol industry continued to increase its new production capacity, rising from 10.762 million tons in 2019 to 29.842 million tons in 2024, an increase of 177.29%. The competitive pressure on the supply side of ethylene glycol has significantly increased. While domestic ethylene glycol is squeezing the market share of imported goods, the competition between domestic refining and chemical integration, coal chemical industry, large-scale coal chemical industry, and small-scale coal chemical industry that were put into operation in the early stage has become increasingly fierce. During this period, due to the slowdown in downstream polyester growth, the ethylene glycol industry entered a prolonged accumulation cycle. However, starting from 2023, the downstream polyester industry will resume a high growth trend, and with the gradual reduction of new ethylene glycol production capacity, the supply and demand structure of ethylene glycol will significantly improve, entering a destocking cycle from 2023 to 2024.

Relatively stable supply

At present, the spot price of ethylene glycol is about 15% higher than the same period last year. With limited changes in cost, the overall operating situation of domestic ethylene glycol production enterprises is better than last year. According to the calculation of Shengyi Society, the ton losses of domestic integrated ethylene glycol, coal to ethylene glycol, methanol to methanol (MTO) ethylene glycol and other products in early August were 145 yuan, 650 yuan, and 1245 yuan respectively, which have improved compared to the previous period and the same period last year. In particular, the loss of coal to ethylene glycol was only half of the same period last year.

Due to improved business conditions, the domestic ethylene glycol production rate is higher than the same period last year. As of August 6th, the comprehensive operating rate of ethylene glycol in China was 61.1%, an increase of 7.84 percentage points compared to the same period last year. Among them, the operating rate of coal to ethylene glycol was 55%, up 12.13 percentage points; The operating rate of petroleum to ethylene glycol production was 65.13%, an increase of 4.67 percentage points; The operating rate of MTO ethylene glycol production was 55.59%, an increase of 27.17 percentage points. In mid August, three sets of domestic facilities with a total production capacity of 1.4 million tons per year will undergo maintenance or conversion, but at the same time, there are also plans to resume production. The two offset each other, and the supply of ethylene glycol has been relatively stable in the near future.

According to data released by the General Administration of Customs, China imported a total of 3.2 million tons of ethylene glycol in the first half of the year, a year-on-year increase of 3.7%. Currently, there is a large amount of ethylene glycol arriving at ports, and there is a high probability of an increase in import volume in August. Although the domestic supply of ethylene glycol has increased, the inventory is lower than the same period last year. In early August, the inventory of ethylene glycol ports in East China was 621900 tons, a year-on-year decrease of 37.46%. In the past month, the inventory of ethylene glycol at the port has remained at a level of 600000 to 700000 tons, and the overall inventory pressure is not significant.

Continuing the weak trend

Industry analysts have a consistent view on the market trend of ethylene glycol in the second half of the year, believing that it will continue to operate weakly in the later period, with a focus on consolidation and volatility.

Hongyuan Futures believes that the inventory pressure of ethylene glycol is limited, but the operating rate of enterprises is higher than the same period last year, and there is also an expectation of increased imports, resulting in overall supply pressure. In terms of demand, the short-term profit improvement in the polyester industry is expected to lead to a rebound in production, but the extent of the rebound is limited due to its own inventory. Due to poor performance in terminal textile and weaving, demand is unlikely to show significant improvement. In this situation, the overall oversupply pattern of ethylene glycol is difficult to change and will continue to be a weak pattern.

Zhongyuan Futures believes that the downstream weaving market has not shown significant improvement, and coupled with the recent high temperature weather in Jiangsu and Zhejiang regions, weaving factories have gradually shut down and taken vacations, resulting in a slight decline in the operating rate of the polyester industry. Due to general terminal consumption, polyester inventory has increased, especially for polyester filament POY inventory, which is significantly higher than the same period last year. Polyester enterprises have certain pressure to reduce inventory.

According to Wang Ping, an analyst at Longzhong Information, the fundamentals of ethylene glycol have been fluctuating in recent times, with both the restart of existing integrated facilities and the centralized maintenance of coal chemical facilities in the later stages; The overall fundamentals are still acceptable, but the macro atmosphere is average. The sharp decline in crude oil and poor overseas economic data have put pressure on the overall commodity trend, and the price of ethylene glycol is expected to fluctuate between 4560 yuan and 4620 yuan in the near future.

In Zhang Guoliang's view, due to the relatively low investment in new production capacity in 2024, the incremental pressure on the supply side of ethylene glycol has weakened, and the expected supply-demand structure in the second half of the year will shift from a significant destocking in the first half to a balance to a small accumulation of inventory. The spot price of ethylene glycol is expected to remain in the range of 4500 yuan to 4600 yuan in the second half of the year, maintaining a fluctuating range operation.