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    Home > Saudi Arabia's production capacity recovered faster than expected

    Saudi Arabia's production capacity recovered faster than expected

    Echemi 2019-10-09


    Since August, ethylene glycol has rebounded sharply under the support of de-inventory. The air raid in Saudi Arabia has caused the futures price to jump continuously. The contract of 2001 reached 5365 yuan/ton, almost returning to the highest level in the initial stage of listing. At present, although the fundamentals still have a certain amount of support, but the price to a large extent has reflected the multi-profitable factors, with the transformation of fundamentals in the later period, ethylene glycol or once again ushered in the trend of short-selling opportunities.

    Saudi Arabia's capacity recovery is faster than expected.

    The attack on Saudi Arabia caused the market reaction of ethylene glycol to be fierce. On the one hand, the crude oil boom caused the cost push and emotional boost of ethylene glycol; on the other hand, Saudi Arabia was the most important importer of ethylene glycol in China. In recent years, China accounted for about 40% of Saudi Arabia's ethylene glycol, and the market was worried about it. The import of diols will be affected. But for now, Saudi Arabia's capacity has recovered faster than expected. Saudi Arabia said its crude oil production capacity would return to its pre-attack level by the end of September. According to market participants, Saudi Arabia has recovered 75% of its crude oil production losses and will fully recover its crude oil production at the beginning of this week. Affected by this, crude oil continued to fall in the past two weeks, almost all of the early gains. At the same time, Saudi Arabia's export of ethylene glycol will also be resolved. This means that the impact of the incident on ethylene glycol will also be resolved.

    Maintenance device restart

    Ethylene glycol is in the capacity expansion cycle. Since the listing, the supply increment brought by the release of new capacity has led to the decline of futures prices for five consecutive months. The rebound is mainly based on the de-inventory caused by equipment maintenance and peak demand season. In the early period, the price of ethylene glycol dropped sharply and led to loss of production enterprises. Some enterprises were forced to stop and repair. In July, the start-up rate of ethylene glycol plant dropped by about 10 percentage points annually. In the past two months, the continuous improvement of the market has made the profit of ethylene glycol significantly repaired, which may promote the start-up rate of ethylene glycol plant.

    it is understood that there has been a resumption of production in recent years, and some devices are planned to resume production after the national day, such as Tian Tian Ying, Yu energy and energy. In addition, 2.15 million tons of new capacity was released in the fourth quarter, and three other units were put into production, but they were basically at the end of this year or the beginning of next year. In short, the restart of the overhaul unit and the release of new capacity will lead to a further increase in the supply of ethylene glycol. The seasonal rule is more obvious.

    September and October are the traditional consumption peak seasons, and the start-up rate of the plant is also at a high level in the year, which also constitutes a significant support for the demand for ethylene glycol. However, after the peak season, its start-up rate usually declines gradually due to weakening demand, especially in the current situation of global economic growth and frequent trade disputes, poor terminal demand expectations may have a drag on loom and polyester start-up rate.

    Based on the above analysis, the supply of ethylene glycol or the release of new production capacity has increased, while demand will gradually weaken after the peak season, so the Pre-Inventory is difficult to sustain, and the time point of re-accumulation of inventory is expected to be in November. Due to the excessive resilience of the current round, the current price or has reflected the current positive factors, before the price turn down, or stage high oscillation, investors can choose the opportunity to layout trend empty sheets. The specific strategies are as follows:

    1. Short the 2001 contract.

    2. Admission price: 5050-5150 yuan/ton.

    3. Target price: the first target is 4850 yuan/ton; the second target is below 4650 yuan/ton.

    4. Stop loss price: break through 5200 yuan/ton.

    5. Capital occupation: about 30%.

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