Downstream demand is weaker and expected to be strong

  • Jan, 10th 2019

2018-2019 is the concentrated production period of ethylene glycol production capacity, but the consumption in the polyester field is far less than the supply. In addition, the Spring Festival is approaching, the downstream will gradually enter the shutdown period, the trend of ethylene glycol accumulation will remain unchanged, and the price will continue. Under pressure.

On December 10, 2018, ethylene glycol futures were listed on the big business, and the market opened sharply on the first day. The market was active. In the following trading days, the 1906 contract was around 5,600 yuan/ton. Oh, but on December 21st, it suddenly fell sharply, even hitting the down limit, and then it continued its downward trend. This article will analyze the market situation of ethylene glycol from the perspective of fundamentals.

Coal production capacity will be launched

In 2018, China's total ethylene glycol production capacity is 10.515 million tons, of which coal production capacity is 4.24 million tons and oil production capacity is 5.4 million tons. The last round of ethylene glycol production capacity was in 2014-2015, the capacity growth rate reached 28%, but due to the low capacity utilization rate, the overall output did not increase significantly. After several years of smooth transition, ethylene glycol production capacity has once again ushered in high-speed growth in 2018, with an annual production capacity of 2.3 million tons. In 2019, it is expected that there will still be 4 million tons of capacity, and among these production capacity, Alcohol based. China has the resource characteristics of “multiple coal, less oil and less gas”, and the continuous improvement of production technology, the downstream acceptance of coal to ethylene glycol is gradually improved. At present, the proportion of coal-based ethylene glycol used in the downstream polyester sector exceeds 20%.

Crude oil prices fell, the cost of oil-based ethylene glycol fell to 4,000 yuan / ton, while the cost of coal was 4,800 yuan / ton, from the point of view of profit, coal-based price discounted oil system 150 - 200 yuan / ton, coal-based profits of about 200 yuan / ton. In 2019, the production capacity of coal-to-ethylene glycol will be released one after another. There is still room for compression in coal-based profits. It is necessary to pay attention to the tightening of supply caused by shrinking profits. Recent data show that from January to November 2018, ethylene glycol production capacity was 6.52 million tons, an increase of 16.6%; from January to October, ethylene glycol imports were 8,306,800 tons, an increase of 15.6%. The overall supply of ethylene glycol market is sufficient and prices are under pressure.

Downstream demand weakened strongly

July-August 2018, PTA and ethylene glycol spot price pushed up the price of polyester products, terminal weaving enterprisesIn the face of losses, its resistance to high-priced raw materials is strong, and it has started to stop production and production, and the polyester stocks have accumulated a lot, which in turn forced the polyester factory to reduce the load. In the fourth quarter, terminal production and sales continued to be sluggish, and apparel and home textile orders did not improve. Among them, in December, the polyester factory announced plans to reduce production, and the centralized maintenance period was in January 2019. In the later period, the start-up load of polyester plants is expected to fall to 75%. In addition, some terminal weaving companies will enter the Spring Festival holiday in advance in mid-January, and the demand for ethylene glycol will further shrink.

Ethylene glycol port stocks and social inventories began to accumulate in September 2018 due to poor demand. Although the early fogging of the port caused the port inventory to decline, the port has been unloaded normally, and the ethylene glycol port inventory continues to increase, reaching 770,000 tons, which is at a high level. At the same time, 1.4 million tons of social inventories are also at a high level during the year. In terms of polyester, POY inventory is 13 days, which is a high level in the past five years. Among them, the inventory of weaving enterprises in Shengze area was 35.5 days, higher than the same period of previous years. High stocks indicate a downturn in downstream demand.

Overall, 2018-2019 is a concentrated period of ethylene glycol production capacity, but the consumption in the polyester field is far less than the supply, and the pressure on ethylene glycol supply is relatively high. Later, as the Spring Festival approaches, the downstream will gradually enter the shutdown period, and the trend of ethylene glycol accumulation will remain unchanged. The superimposed cost end oil price will fall, and the ethylene glycol price center will move down.