At the beginning of 2024, the ethylene glycol market reversed its decline, and the price of the main futures contract rose significantly. On the 15th, the main ethylene glycol contract closed up 2.05%, closing at 4,630 yuan/ton.
Recently, polyester chain products have mostly peaked and declined due to changes in crude oil prices, but ethylene glycol prices have bucked the trend and continued to rise. In the case of mediocre performance of energy and other chemicals, the price of ethylene glycol “outshines”, and this rhythm exceeds market expectations.
Disturbances on the supply side, imports are expected to decline significantly
From an analysis point of view, the key factor leading to price increases against the trend is still on the supply side. Expectations of lower imports and lower port inventories have led to greater market concerns about supply. As early as mid-to-late December 2023, due to weather reasons, there were fewer ethylene glycol cargo ships arriving at the port. From the week of December 14 to the week of December 21, the main port in East China dropped from 157,300 tons to 99,000 tons. Market expectations for lower imports This has led to a surge in the market, with outstanding performance in the entire polyester chain. Judging from the observed ethylene glycol port inventory in East China, the inventory has experienced a unilateral decline since December 7. As of January 4, the port inventory level dropped to 937,000 tons, the lowest level in four months.
On January 5, market news stated that the supply of ethylene glycol units in Saudi Arabia continued to shrink due to rising costs, which in turn led to a significant decline in shipments in January. From the perspective of my country’s ethylene glycol import areas, Saudi Arabia occupies an important position. According to the data released by the General Administration of Customs of the People’s Republic of China for the first 11 months of 2023, it can be found that Saudi Arabia is my country’s main import source of ethylene glycol. The proportion is as high as 50.81%, so changes in the start-up of Saudi Arabia’s devices have a significant impact on my country’s ethylene glycol prices. In particular, the Saudi Arabian plants were originally planned to restart around the end of February, but the latest progress is that the restart time of these plants is yet to be determined, which has triggered market concerns about a reduction in future supply of ethylene glycol. This news has had a pulsating impact on the ethylene glycol market.
Domestic construction starts at low level, supply and demand expectations are good
The expectation of lower imports analyzed above is a shutdown factor that leads to price changes. In addition, the fundamentals of the domestic market also support this trend. Many ethylene glycol units in the domestic market are in the maintenance period or operating at reduced loads. Judging from the daily operating load of ethylene glycol in the past five years, the current operating load is at the lowest level in the past five years. The downstream polyester industry is at a high level of production in the past five years. Based on the upstream and downstream conditions, the supply and demand for ethylene glycol in the short term are expected to be good.
Overall, in the short term, the news has created expectations of tight import supply, which in turn has had a pulsating impact on the market. Coupled with the current low domestic start-up, the overall supply and demand expectations are good, which can support the rise of the ethylene glycol market. In the short to medium term, low port inventories and good supply and demand fundamentals may cause ethylene glycol prices to fluctuate at high levels and perform better than other products in the polyester chain. However, there may be a certain correction after market sentiment is digested.
Observing other products in the polyester chain, due to the mediocre domestic market demand since January and the mostly volatile trend on the cost side, each product mostly follows the price of crude oil, but there is a certain time lag in transmission. At this time, differences in the supply side are the main factors that cause the price differentiation of each product. Looking at each product, PX and PTA inventories are gradually approaching five-year highs. The relatively sufficient supply and gradually accumulated inventory may cause them to face load reduction pressure in the future. However, judging from the profit situation, the processing fees of upstream PX and PTA are at a high level, and there is certain support for the upstream’s willingness to start production. On the other hand, at the polyester product end, due to the low gross profit level and the approaching Spring Festival, the demand for polyester end may be reduced first, further forming negative feedback and transmitted to the upstream, causing front-end raw material products to face certain pressure.
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