Supply pressure returns and glycol enters the accumulation cycle again
2023/7/4
Coal-based enterprise profit repair
Influenced by the end of maintenance and profit recovery, the supply of ethylene glycol increased significantly in the ring. As of June 29, the start-up rate of coal-based ethylene glycol rebounded to 66.05%, 23 percentage points higher than the low point in May; the start-up rate of oil-based ethylene glycol rebounded to 63.44%, 10.8 percentage points higher than the low point in May. Specifically, since the second quarter, coal prices have dropped significantly, and the profits of coal-based glycol enterprises have been repaired, and the enthusiasm of enterprises to start work has been improved. In addition, from April to May, some coal-based enterprises entered into regular maintenance period, and the current maintenance period has ended, Xinjiang Tianye, Xinjiang Guanghui, Shanxi Voneng and other enterprises have resumed production one after another, and the coal-based start-up rate has improved significantly.
For oil-based enterprises, several sets of integrated large-capacity devices resumed production, including the 750,000-ton and 800,000-ton devices of Zhejiang Petrochemicals resumed production at the end of last month, and the 900,000-ton device of Satellite Petrochemicals resumed production at the end of June, and the start-up rate increased. Because the current price of related products ethylene oxide is relatively weak, so some E0/EG co-production units have moderate cut back MEG action, which also increased ethylene glycol production to a certain extent. In addition, affected by the falling price of ethylene, Hainan Refining's ethylene is ready to be used for its own digestion, and its ethylene glycol unit is expected to return in September. Overall, the supply chain of ethylene glycol increased to a large extent.
Polyester starts remain high
Since May, the polyester segment has performed better, driven by the double of profit improvement and inventory decline, the enthusiasm of polyester plant production has increased significantly. As of June 29, polyester start-up rate rose to 93%, at the highest level of the year. In addition, polyester has 5.26 million tons of new production capacity in the first half of this year, the actual output is higher, May production in 5.62 million tons, is expected to continue to raise production in June, polyester high output to glycol to provide a strong rigid demand support.
Currently, the market is doubtful about the sustainability of the high polyester start, mainly because of the lack of new orders from terminals in the off-season background. In addition, the performance of grey fabric is weaker than upstream polyester, grey fabric has entered the loss-making state, resulting in polyester downstream weaving mills and bombing plants to reduce the purchase of polyester raw materials, the start of bottlenecks. As of June 29, the weaving mill start-up rate was 71%. If the terminal starts to decline, in accordance with the bottom-up transmission effect of demand, polyester plants may face accumulation, when the inventory pressure gradually increased, polyester plants have the possibility of reducing negative demand negative feedback may be further transmitted to the upstream glycol. However, according to the historical analysis of the background of polyester negative reduction, generally is the plant inventory pressure, profit losses and the continued decline in absolute prices leading to inventory depreciation at the same time, the polyester plant's willingness to reduce the negative will only increase significantly. For the time being, although the marginal demand has turned weaker, but polyester does not yet have the conditions to reduce the load, is expected to short-term polyester starts still have a strong tenacity.
Once again into the tired storage cycle
As of July 3, glycol port inventory was at 1,028,000 tons, with a tired warehouse cycle. The supply of ethylene glycol contracted in the previous period, and the inventory was phased out in the second quarter, but the inventory volume is large and the pressure is difficult to be completely relieved. The current supply pressure returns, and glycol enters the accumulation cycle again.
Comprehensive analysis of the above, polyester starts maintain high level, glycol rigid demand support is strong, but supply pressure returns, glycol is expected to re-enter the tired storage cycle, price performance to weak.
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