The Prospect of Ethylene Glycol Industry Is Worrying

The ethylene glycol market entering 2022 has not achieved a perfect start. The rapid expansion of production capacity has put pressure on the market. Low demand makes the raw material market weaker in the off-season and not prosperous in the peak season, and high inventory is a stumbling block for the market to improve. Overall, in 2022, ethylene glycol will continue to struggle in the quagmire of excess capacity, and it is difficult for the market to push up expectations.

Increased overcapacity

From the perspective of 2021, the production capacity of ethylene glycol will expand rapidly, increasing by 5.34 million tons. The market will move forward at a low level, and even break down the cost line of coal-based and methanol-based processes. Coal-based and methanol-based ethylene glycol enterprises are even more difficult.

According to statistics, in 2021, the domestic ethylene glycol production capacity is 20.81 million tons, the 800,000-ton/year project of Zhejiang Petrochemical has been postponed due to approval, and the commissioning of several new coal-to-ethylene glycol projects has been delayed. In 2021, the output of ethylene glycol will be 12.66 million tons, and several large-scale plants such as Satellite Petrochemical and Zhejiang Petrochemical have been put into operation smoothly, making a great contribution to the output.

2022 is still a year for ethylene glycol to continue to expand, specifically Shenghong Refinery 2 million tons/year, Zhenhai Refinery Phase II 800,000 tons/year, Sanjiang Chemical 700,000 tons/year, Yulin Chemical 600,000 tons/year Years and other projects, a total of 5.7 million tons. As my country's resources are less oil and more coal, coal-to-ethylene glycol as an emerging process can save oil resources, so the new coal-to-ethylene glycol production capacity occupies half of the country. However, even if coal-based ethylene glycol can participate in the production of antifreeze, unsaturated resins and coatings, there are still certain limitations in its application in the polyester field. Therefore, oil-based ethylene glycol still occupies a dominant position in the market as a traditional process.

Profitability is unlikely to improve

Throughout 2021, the profits of the four ethylene glycol processes are quite different. Oil-based ethylene glycol companies with slightly better profits could maintain a positive value in the first half of the year, but in the second half of the year, as the crude oil price stood at US$80/barrel, their profits began to be negative. During the year, the average profit of oil-to-ethylene glycol ton products was only US$27.9.

The average profit per ton of coal-to-ethylene glycol in 2021 is -623 yuan.

The most appalling thing is methanol to ethylene glycol, the cost of which is much higher than the two processes of coal and naphtha. It is below the profit line throughout the year, and the company has suffered serious losses. In 2021, the profit per ton of product will remain at -1568 yuan. 

For 2022, many institutions predict that the international crude oil market will be in short supply most of the time, especially in the first half of the year, oil prices will remain high. The coal market will experience tight supply and demand during peak hours in some regions, and coal prices will also fluctuate at a high level. The cost of ethylene glycol remains high, and the profitability of production enterprises is worrying.

Huge imports hit the market

The polyester industry is an important downstream of ethylene glycol. Its production capacity growth rate will slow down in 2021, market resources will become saturated, and competition among enterprises will become increasingly fierce. Due to the shortage of containers, the global sea freight rate has doubled, which has brought a greater impact on the export of polyester products, resulting in a shrinking export volume. In addition, the "dual control" of energy consumption and the power rationing policy have brought a greater impact on the entire polyester industry chain, which in turn is detrimental to the ethylene glycol market.

While the growth of demand is slowing down, the huge amount of imports has an impact on the ethylene glycol market. It is understood that my country's polyester production capacity has increased from 50.55 million tons in 2017 to 68.325 million tons in 2021, with an average annual growth rate of 7.27%. In 2021, the domestic polyester production capacity will increase by 5.24%, the total polyester production capacity will be about 67.325 million tons, the actual output will be around 57.3 million tons, and the consumption of ethylene glycol will be about 19.2 million tons, while the domestic ethylene glycol output in the same period is 12.66 million tons. If only from the data, domestic ethylene glycol should be in short supply, but since the import volume reached 8.426 million tons, the supply of ethylene glycol actually exceeded the demand.

In 2022, the polyester production capacity is expected to be 74.585 million tons, the actual output may be around 60 million tons, and the corresponding ethylene glycol demand is 20 million tons. In the context of imported ethylene glycol products competing for the market, the operating rate of the domestic ethylene glycol industry may continue to remain low, and the industry surplus situation is difficult to resolve.