On the 5th, a “big positive line” in the afternoon made ethylene glycol futures “feeling proud”. The reporter observed that under the mediocre performance of energy and other chemicals, ethylene glycol futures “outperformed”, and the main contract EG2405 increased its positions significantly and closed above the previous high. This pace exceeded market expectations.
The reporter learned that the sudden rise in ethylene glycol market in the afternoon was mainly boosted by the news of reduced supply from Saudi Arabia. According to CCF news in the afternoon, due to rising costs, the supply of ethylene glycol units in Saudi Arabia continues to shrink. Affected by this, local shipments in January were significantly reduced.
“Before this news came out, the market had already expected that the shipment plans of major overseas suppliers from January to February would drop to a low level. This news strengthened the market expectation that there would be fewer overseas cargoes arriving at the port from January to February. In addition, despite the seasonal reduction in downstream load around the Spring Festival, the inventory of ethylene glycol ports has continued to be destocked recently, and multiple domestic ethylene glycol units have implemented maintenance and load reduction operations, so supply and demand expectations are still good.” Chief Analyst of GF Futures Energy Chemicals Teacher Zhang Xiaozhen said.
“Due to the impact of device efficiency, the supply of ethylene glycol in Saudi Arabia continues to shrink.” Founder mid-term futures analyst Feng Xiaofen said that currently only 2-3 sets of devices are operating normally, and other devices are in a shutdown or load reduction state, while Saudi Arabia is The main source countries of my country’s ethylene glycol imports. As Saudi Arabia’s supply shrinks, ethylene glycol imports are expected to shrink significantly from January to February, which will have a certain boost to prices.
In this regard, Xie Wen, leader of the energy and chemical group of Zhongda Futures, also introduced that my country mainly imports ethylene glycol from Saudi Arabia, Canada and other countries, among which the import volume from Saudi Arabia accounts for the largest proportion, ranging from 46% to 56% in different years. %, changes in Saudi ethylene glycol supply have a greater impact on the market.
In her view, the decrease in ethylene glycol arrivals in Hong Kong in January had become a market consensus before this rally. The focus of the afternoon rally was that these devices were originally planned to restart around the end of February, but the latest progress is the restart of these devices. The time is yet to be determined, which has triggered market concerns about the future supply reduction of ethylene glycol.
According to CCF statistics, 1.3 million tons of new ethylene glycol production capacity are planned to be put into operation in 2024. There are no new devices planned to be put into production abroad. However, there are still many new devices planned to be put into production for downstream polyester. The new production capacity of polyester is equivalent to the new demand for ethylene glycol. The volume is significantly greater than the supply of new ethylene glycol production capacity, and the supply and demand pattern of ethylene glycol production capacity is expected to ease in 2024.
“Before this wave of market rises, from the perspective of absolute valuation levels, the valuation level of ethylene glycol was low, and with the fundamentals expected to improve in the later period, the market paid more attention to it.” Feng Xiaofen said.
In fact, since the beginning of the year, the ethylene glycol futures 2405 contract has broken through the oscillation range in 2023, and its performance has been relatively strong, which has attracted great attention from the market.
In this regard, Pang Chunyan, chief analyst of SDIC Essence Futures Energy, explained that the expectation of overseas supply shrinkage for ethylene glycol, combined with a significant decline in investment production in the new year, is the main factor supporting its strong price. After the transportation of ethane and ethylene glycol from North America to my country was affected by low water levels in the Panama Canal, the Red Sea crisis triggered supply problems for Saudi ethylene glycol. “The sharp contraction in imports has led to the market being more optimistic about the improvement in supply and demand of ethylene glycol in the new year, and the price has therefore performed better.” She said.
“Currently, ethylene glycol supply and demand are improving, inventories are declining, and port arrival forecasts are lowering. Coal prices are stable, and ethylene glycol valuations are low, and there is insufficient downward momentum for prices.” Xie Wen said that during the upward trend of ethylene glycol, , the market was stimulated by Saudi Arabia’s production cuts and the Red Sea incident, and the price range continued to move upward. In comparison, the supply and demand of PTA is relatively loose, and the upward momentum of crude oil prices is insufficient. There is a high probability that the short-term price trend of ethylene glycol will be stronger than that of PTA.
In Xie Wen’s view, after a long period of decline, with the improvement of supply and demand and the fermentation of various bullish events, ethylene glycol prices have downward support, and the upward extent depends on the degree of supply reduction.
In this regard, industry insiders generally believe that the key to the current trend of ethylene glycol futures still lies on the supply side. “Expectations of a phased contraction in imports continue to rise. Domestic construction has declined slightly and port closures have led to inventory declines. The supply side continues to benefit.” Pang Chunyan said that as prices rise, the two major naphtha integration and oxalate ester methods The profit of the process route has been significantly restored, but it has not yet entered the full profit range. “The short-term market focus is on shrinking supply and strong price performance, but it should also be seen that polyester and downstream industries will enter a concentrated production reduction period before the Spring Festival, and demand will continue to fall. Moreover, the forecast arrival volume of ethylene glycol at the port is relatively high, and the port supply There is plenty of reality,” she said.
In Feng Xiaofen’s view, we need to pay attention to whether there are new favorable factors on the supply side and when downstream demand will enter the traditional off-season mode during the Spring Festival.
“Changes in supply-side devices include maintenance and conversion of domestic devices as well as shutdowns and load reductions of overseas devices. In terms of downstream demand, the overall terminal domestic demand has performed relatively well this year, which supports polyester to maintain high operation.” Feng Xiaofen said According to information survey statistics, most weaving factories began to enter the Spring Festival holiday mode in mid-to-late January.The market needs to pay attention to when the load of polyester factories downstream of ethylene glycol will be reduced and the intensity of equipment maintenance before and after the Spring Festival.
Pang Chunyan believes that in the long term, ethylene glycol can still be allocated more due to overseas supply disturbances and slowdown in domestic production.
“Due to the large number of overseas equipment maintenance in the first quarter, the shipment plans of major overseas suppliers from January to February have dropped to a low level. The import of ethylene glycol is expected to decline in the first quarter, which is conducive to inventory reduction, and the mid-term supply and demand expectations are better.” Zhang Xiaozhen It said that in the long term, domestic new ethylene glycol production capacity will be 1.3 million tons in 2024, concentrated in the fourth quarter, and there are no new production capacity plans abroad. In addition, as ethylene glycol continues to suffer losses for a longer period of time, the probability of supply-side contraction increases.
“Due to the abundant supply of goods and the factors of downstream production cuts during the Spring Festival, in the short and medium term, the rapid rise in ethylene glycol futures is unsustainable. However, if we consider that intermediate traders and downstream polyester continue to actively increase inventory, the market may exceed Expected performance.” In Pang Chunyan’s view, the short-term variables of the ethylene glycol market lie in the willingness to stock up in various links and the start-up of polyester plants, while the medium-term variables lie in the evolution of geopolitical conflicts, the recovery time of Panama Canal traffic, and the recovery of domestic profits after profit recovery. The restart progress of the external device.
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