Fundamental expectations weaken, ethylene glycol faces continued downside risk

At present, there is room for further increase in the load of domestic ethylene glycol plants, and at the same time, downstream demand is at risk of weakening after the National Day. The continued decline in the superimposed crude oil price will collapse the cost of ethylene glycol. It is expected that the ethylene glycol 2101 contract in the future may continue to fall. 

The Fed has little room for easing

In the September FOMC meeting, the Federal Reserve kept the federal funds target interest rate unchanged from 0-0.25% and maintained the scale of bond purchases unchanged, in line with market expectations. Although the statement of this FOMC meeting is more biased than that in July, it basically continued the contents of the new framework in August. The market has been fully digested, and Powell's speech did not release more dovish signals. It is expected that the Fed’s most accommodative period has passed, and the United States will enter a new stage of delicate trade-offs between recovery and policy. Under this shift, the overall direction of the policy is to gradually "withdraw the fire" as the economic recovery advances. This is not conducive to maintaining a firm posture for energy and chemical commodities such as crude oil and downstream ethylene glycol.

The weakening of crude oil fundamentals indirectly drags down the decline of ethylene glycol

As OPEC+ oil-producing countries entered the second stage of production cuts, the pressure on crude oil supply gradually picked up. According to OPEC's latest monthly report, the supply of crude oil increased in August, mainly from Saudi Arabia, the UAE and Kuwait. Among them, Saudi crude oil production increased by 475,000 barrels/day, and rebounded to 8.892 million barrels/day, which has exceeded the production cut limit. The UAE and Kuwait increased production by 180,000 barrels/day and 127,000 barrels/day, respectively. The overall production reduction implementation rate of oil-producing countries fell sharply. . At the same time, among those countries that intend to implement compensatory production cuts, Nigeria has not cut production. Only Iraq has fulfilled its contract and cut production by 100,000 barrels per day, but it still falls short of its promised standard. In addition, OPEC+ failed to reach a consensus on further reductions in crude oil production at the September 17 meeting. It still maintained a reduction of 7.7 million barrels per day and only adopted expected management, which obviously cannot withstand the increase in supply from other oil-producing countries. The momentum of a rebound in volume.

Judging from the seasonality of crude oil consumption in previous years, after Labor Day in the United States on September 7, the North American summer oil peak period ended, oil demand turned into seasonal off-season, and the operating rate of US refineries peaked and declined. The crude oil inventory of China has once again entered a state of accumulation. According to statistics, as of the week of September 11, the operating rate of US refineries remained at 75.80%, a sharp drop of 6.2% from the year's high of 82.00%, highlighting the past seasonal peak season. Although the US commercial crude oil inventory fell slightly to 496 million barrels on a week-on-week basis, it was still at the highest value in the same period in the past eight years. In addition to the off-season of seasonal demand in overseas countries such as the United States, Chinese demand will also decline. Although the growth rate of crude oil imports remained at double-digit growth in August, compared with the year-on-year growth of 19%, 34%, and 25% from May to July, the growth rate dropped sharply. It is expected that under the influence of high inventory and low demand, September The growth rate of my country's crude oil imports will continue to fall. The decline in global oil demand in 2020 will exceed the previous forecast, and the recovery next year will be slower than expected, which makes it difficult for oil prices to rely on the demand side to force their efforts to usher in the short- to medium-term rise.

On the whole, in the context of the weakening of the oil market's supply and demand outlook, future crude oil futures prices at home and abroad are expected to fall easily but not rise, which will also drag ethylene glycol to show a weak downward trend.

 Ethylene glycol supply pressure rebounds and downstream demand weakens

Although the short-term overseas supply of ethylene glycol is tight and many domestic installations are overhauled at the same time, in the medium and long term, the pressure on the ethylene glycol supply side will gradually be released after the National Day. At present, the 400,000 tons/year ethylene glycol plant of Zhongke Refinery has been postponed to the end of September, and the commissioning time of the 500,000 tons/year ethylene glycol plant of Sinochem Quanzhou is expected to be after "November". In addition, in the fourth quarter, domestic Hubei Sanning Chemical's 600,000 tons/year ethylene glycol plant will also be put into operation. In addition, after October, terminal demand is expected to weaken, so ethylene glycol will face the double shock of supply and demand, and then the price of ethylene glycol will continue to be under pressure.

From the perspective of downstream demand, since September, the operating rate of terminal looms in Jiangsu and Zhejiang has continued to rise, but the upstream polyester yarn has a serious surplus and inventories continue to accumulate. At present, it is the traditional peak season of "Golden Nine and Silver Ten". The rainy season and high temperature weather in the south have passed. Terminals rushed to orders, and the operating rate further rebounded. However, due to the relatively high level of overall stocking, the overall inventory level is still high despite recent promotional offers for polyester filaments. Polyester filament POY, DTY, and FDY inventories have continued to rise, and the polyester end operating rate has declined slightly. In the short term, due to the acceptable terminal operating rate, polyester is still expected to maintain a high operating rate from September to October. After the National Day, terminal orders will gradually decline, and the pressure on polyester will increase rapidly. It is not ruled out that the terminal will be forced to gather in the late fourth quarter. The ester end will reduce the negative load and the demand pressure for polyester raw material ethylene glycol will be greater in the latter part of the fourth quarter.

On the whole, as the global economy recovers steadily, the expectation of loose liquidity has weakened. At the same time, autumn and winter are the seasons for the high incidence of new crown pneumonia epidemics, and the risk of recurrence of the epidemic increases. It may induce a callback in crude oil and other commodities and indirectly drag ethylene glycol. Follow down. Under the dual pressure of the recovery of ethylene glycol supply pressure after the holiday and the weakening of downstream demand, it is expected that the ethylene glycol 2101 contract will continue to fall in the market outlook. It is recommended that investors adopt the idea of selling short rallies or continuing to hold empty orders. , Build a warehouse in the range of 3900-4000 CNY/ton, stop the loss area at 4050-4200 CNY/ton, and target at 3200-3300 CNY/ton.