October 31st news
Ethylene Glycol Market Situation in China
October Ethylene Glycol Market in China
In October, ethylene glycol experienced a round of intense fluctuation characterized by "high-level pullback → geopolitical risk-driven rebound → near-strong far-weak tug-of-war." At the beginning of the month, the spot price quickly fell from over 7,300 CNY/ton in September to around 5,600 CNY/ton. Subsequently, in late October, driven by rising geopolitical risks in the Middle East and extremely low port inventory, the main contract continuously rebounded, hitting the daily limit on October 28, closing at 5,258 CNY/ton, with a single-day increase of 5.62%. The core contradiction for the entire month lay in the continuous tug-of-war between the "strong reality" represented by extremely low inventory and deep basis, and the "weak expectation" indicated by the commissioning of new production capacity and weak demand. Overall, the basis and price fluctuations were significant in October.
1. A Pullback at the Start of the Month: Easing Geopolitical Premium and a Shift in Expectations Toward Inventory Accumulation
The high prices in September were underpinned by import disruptions caused by navigational constraints in the Strait of Hormuz. In August, ethylene glycol imports totaled just 117,400 tons, plunging 55.75% month-on-month and more than 80% year-on-year. However, as October began, signs of de‑escalation emerged in the Middle East: President Trump stated that he would not strike Iran before the midterm elections and signaled a willingness to engage in dialogue, prompting a swift shift in market pricing dynamics from “supply disruption” to “expectations of inventory build‑up.” On October 9, spot prices in Zhangjiagang plummeted by 440 CNY per ton in a single day, while inventories at major East China ports also started to rebound from their late‑September low of 99,000 tons. Meanwhile, China’s supply conditions showed marginal improvement: in September, industry operating rates rose 8.78 percentage points month-on-month to 60.84%, and improved ethylene‑based profit margins spurred a concentrated ramp-up in production. On the demand side, however, headwinds persisted: polyester operating rates fell to around 74%, weaving loom utilization in Jiangsu and Zhejiang hovered near 56%, and downstream buyers, facing losses on immediate‑purchase‑and‑production strategies, shifted decisively toward rigid‑demand procurement.
2. Late Month Rebound: Resonance of Geopolitical Tensions and Extremely Low Inventory in China
The catalyst for the market reversal in late October came from the escalation of the situation in the Middle East. The Houthi attack on Saudi Arabia's Tanura oil refinery, along with the lack of a final agreement between the U.S. and Iran, kept Brent crude prices at a high level around $116 per barrel. Ethylene glycol has a high import dependency on the Middle East, and the risk to navigation through the Strait of Hormuz directly reinforced expectations of reduced future imports. However, what truly amplified price volatility was the inventory situation: as of October 28, ethylene glycol inventories in the main ports of East China had dropped to 135,000 tons, a decrease of 25,000 tons from the previous period, reaching extremely low levels since 2021. Low inventories, combined with a deep contango structure (spot premium over futures), provided a safety cushion for near-term long positions. Additionally, the profit margins for oil-based ethylene glycol production were compressed to very low levels, leading multiple plants, including those of Hengli, CNOOC Shell, and Zhenhai Refining, to switch production to PE and EO. The operating load of ethylene-based production fell from 77% to around 70%, and the expectation for inventory accumulation narrowed from 200,000 tons per month to around 100,000 tons.
Ethylene Glycol Market Forecast in China
The ethylene glycol market continues to exhibit a near‑term strength, far‑term weakness pattern, though upside potential remains severely constrained. As of October 30, spot prices in Zhangjiagang settled at RMB 5,890 per tonne, with the main contract basis remaining in deep contango. Guangda Futures characterizes the current situation as a tug‑of‑war between “strong geopolitical realities” and “weak expectations of inventory build‑up”: in the short term, geopolitical risks continue to weigh on imports, while low inventories and a deeply inverted basis provide solid support for near‑month contracts; however, medium‑term expectations of inventory accumulation, coupled with the anticipated commissioning of a new 1 million‑tonne‑per‑year plant at Gulei in mid‑November, impose clear headwinds on longer‑dated futures. GF Futures further notes that the underlying driver of this rally is the concentrated pricing of near‑term supply tightening amid geopolitical catalysts, rather than a sustained demand recovery. Should signs of de‑escalation emerge in the Strait of Hormuz or port inventories begin to accumulate persistently, the geopolitical premium built up earlier will face renewed downward pressure.
In October, ethylene glycol prices did not follow a single trend; instead, they were driven by repeated shifts in supply expectations triggered by geopolitical events, compounded by low inventory levels that amplified price volatility. Near-term contracts remained supported amid tight market conditions and geopolitical uncertainty, yet the prevailing demand dynamics—low operating rates, thin margins, and subdued willingness to invest—limited the upside. Meanwhile, longer-dated contracts continued to face downward pressure from the ramp-up of new capacity and the realization of inventory buildups.
In summary, ethylene glycol prices in November are expected to trade in a broad range at elevated levels, with stronger near-term futures and weaker longer-term ones. The spot market is likely to hover between roughly 5,200 and 5,900 CNY per ton, as neither a sustained upward nor downward trend appears fully established. Supporting factors include: East China port inventories standing at just 117,000 tons—near their lowest level since 2021—and squeezed naphtha‑to‑ethylene margins prompting several plants, including Hengli and CNOOC‑Shell, to shift production toward PE and EO. Ethylene‑based capacity utilization has eased from around 77% to approximately 70%, while coal‑to‑ethylene units are also undergoing maintenance, leading to a significantly narrower-than-expected build‑up in inventories. Meanwhile, ongoing geopolitical risks in the Middle East continue to provide an emotional premium to near‑month contracts. Pressuring factors include: the planned commissioning of Sinopec’s Gulei 1-million‑ton‑per‑year unit in late November, which will likely prompt early pricing by month‑end; and the concentrated addition of new capacity from Hainan Refining & Chemical and Shenghong in December. On the demand side, polyester operating rates remain around 74%, and downstream sectors are entering the off‑season, confirming a clear trajectory of inventory accumulation—with only uncertainty regarding its magnitude (estimates ranging from about 100,000 to 710,000 tons). Key inflection points lie in the evolution of Middle Eastern dynamics following the U.S. midterm elections on November 3, and in the actual ramp‑up schedule of the new Gulei unit in late November. Under the baseline scenario, prices are likely to oscillate within the current range: easing geopolitical tensions would push prices toward the lower end, while further delays in commissioning could trigger short‑term upside spikes—though sustainability would depend on downstream demand. Given current operating data, however, meeting this condition within November appears challenging.
