News summary
The ethylene glycol market is expected to remain weak and volatile in JunebonusspinsSupply chain pressures and raw material costs constrain prices. Although production capacity growth has slowed down and the long-term value of multi-allocation has increased, the driving force of 01 and 05 contracts is expected to increase.
Newsletter text
Tight supply in the ethylene glycol market is compounded by cost pressure, and the market is expected to remain low and volatile in June
In mid-May, the ethylene glycol market experienced a round of bucking trends. Although prices rose, supply shortages and raw material cost pressure led to a weak market. The refined oil market is weak, export demand is weakening, and domestic refinery operating rates are at a low level, affecting the supply of chemical raw materials. The operation of glycol units is limited, the operating rates of some oil units have been lowered, and the resumption of production and maintenance of coal units cancel each other out. The resumption of large units in June will increase supply, but the demand for polyester start-up on the demand side is still high.
[Downstream polyester start-up demand is strong, and ethylene glycol market supply is tight]
On the demand side of ethylene glycol, destocking was slightly achieved in May, but supply increased after the return of large units in June, and start-up demand for polyester remained high. Downstream factories have low raw material inventories, but demand-side profits are low, and purchasing enthusiasm declines. Although the market is rumored that leading downstream manufacturers are considering reducing production, there is actually no clear news. The value of multiple allocations is prominent, and the ethylene glycol price center is expected to recover in 2024 or early 2025.
[The growth rate of ethylene glycol production capacity has slowed down, expectations for downstream capacity expansion have weakened, and market supply and demand have gradually balanced]
There is less new ethylene glycol production capacity this year. Only the first phase of Zhongkun and Kunming and about 800,000 tons of Ningxia Baoli are expected to be put into production. In 2023, the phase-out/long-term shutdown production capacity will be approximately 1 million tons, of which more than half of the coal-based production capacity will be produced. Downstream production capacity expansion is expected to be around 7.5 million tons, but it may shrink. Demand for ethylene glycol has increased by 2 million tons, and production capacity has increased by 1 million tons. The increase in demand exceeds supply.
[Ethylene glycol inventories converted, factory inventories fell to low points, price-driven expectations strengthened]
Factory inventories are currently as low as 3bonusspins.3,000 tons, compared with 200,000 tons in the same period last year, indicating that inventories have been converted. Port explicit inventories are still high, and poor demand has led to stagnation in de-conversion. If port inventories fall to 500,000 tons, price drivers will emerge. Demand in the peak season in the third quarter recovered, and low factory inventories will be the driving force.
