Due to the impact of the COVID-19 epidemic and the successive commissioning of new production capacity, the Asian glycol import market will face a more difficult situation in the second half of this year. The price of ethylene glycol fell to a record low at the end of March, and began to experience a slow rebound in April, and has been hovering between US$410-430/ton in the past two months.
Lower output may offset new supply
From the current point of view, it is unlikely that the price of ethylene glycol will break through the historical low in the first half of the year. Manufacturers in some regions are cutting operating rates in response to falling profits. "If prices fall further, more manufacturers will significantly reduce operating loads." A trader said that due to rising raw material costs, suppliers in Taiwan, South Korea, and Japan will either choose to shut down their installations or reduce operations. rate. The operating load of China's coal-based glycol plant is only 40% to 50%, because most of the plants are suffering from negative profit margins. However, despite the reduced supply, Sinochem Quanzhou and Zhongke Refinery will also put into production two new ethylene glycol plants in China, which will put pressure on market sentiment. It is expected that in the third or fourth quarter of this year, the Asia-Pacific region will add 1 million tons of ethylene glycol production capacity per year.
Port inventory remains high
As of mid-July, ethylene glycol stocks at Chinese ports had increased to nearly 1.5 million tons, the highest level since 2014. The inflow of additional imported goods and the slowdown in end-user purchases are the main reasons for the high inventory. In addition to the regular supply from the Middle East and Northeast Asian countries, in the first half of the year, ethylene glycol imports from the United States and India also began to surge. The new crown pneumonia epidemic has led to a decrease in demand, and goods from the above-mentioned regions have been diverted to the Chinese market. American goods that should be exported to Europe have nowhere to go except China.
India also transferred the difficult-to-find ethylene glycol cargo to China. As India began to implement a nationwide blockade in late March, its downstream polyester plants were forced to close. As China's new crown pneumonia epidemic is basically under control, China, the world's largest consumer of ethylene glycol, has naturally become a ready market for this product. In late March, China's port inventory rose to a high of 1 million tons. Since then, Chinese ports have remained at this high level, but demand has fluctuated and has not improved significantly.
Polyester operating rate continues to decrease
Downstream polyester producers said that in view of the global economic recession, this year's polyester demand will drop by 20% to 30% compared to 2019. Based on rising polyester inventories and declining sales volume, manufacturers have drastically cut prices in order to stimulate purchases, squeezing polyester profits. July and August are usually the off-season for the polyester industry. Due to slowing demand and declining profits, Chinese polyester producers have been reducing their operating load since July.
Due to the slowdown in European summer export business, the polyester business load will continue to decline throughout the summer. "Now we pin our last hopes on September and October, because these two months are the peak season for the textile industry." said a Chinese polyester producer.
In addition, the economic outlook will also cast a shadow over the petrochemical market. The International Monetary Fund (IMF) predicts that the global economy will shrink by 4.9% this year, down from the 3.0% forecast in April. The International Monetary Fund also lowered its economic growth forecast for 2021 to 5.4% from the previous forecast of 5.8%.
Polyester producers said that after the 2008 global financial crisis, the ethylene glycol market experienced a short trough, after which the price rebounded rapidly and strongly. But now it seems that this year's ethylene glycol market seems to take longer to fully recover and stabilize.
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