Intensifying competition for ethylene glycol production capacity

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Source: China Chemical Industry News. Since last September, the domestic ethylene glycol market has been in a downward trend for 6 months now; prices have dropped from a peak of over 8,000 yuan per ton to the current low of 4,500 yuan per ton, representing a decline of more than 40%. In the long term, as the peak period for the commissioning of new projects arrives, overcapacity in ethylene glycol production will become more apparent, leading to further intensification of competition in both domestic and international markets. 　 Production capacity is seeing significant growth. At present, both companies that produce ethylene-based ethylene glycol and those that use syngas to produce ethylene glycol are facing losses. Nevertheless, manufacturing companies continue to operate at full capacity, using the market to generate profits in order to cope with the surge in domestic production capacity and competition from imported goods. 　 It is reported that some manufacturers of ethylene glycol produced from syngas plan to carry out maintenance work in the second quarter. Meanwhile, demand for polyester in downstream industries is on the rise; however, due to high inventory levels, the ethylene glycol market remains in a difficult situation. 　 It is understood that the high inventory problem in the ethylene glycol market stems primarily from the rapid growth in production capacity. By the end of 2018, China’s ethylene glycol production capacity reached 12 million tons, accounting for 32% of the global total; of this amount, the capacity for producing ethylene glycol from syngas was around 5 million tons, representing 42% of the total. In 2018, China’s ethylene glycol production capacity increased by 2.15 million tons, with an annual growth rate of as high as 22%. Along with the increase in production capacity, output has also seen a significant rise; in particular, thanks to technological upgrades, many of the syngas-to-ethylene glycol plants put into operation in previous years are now capable of operating at high capacities. 　 Industry experts analyze that the current surplus in ethylene glycol supply is just the beginning, and the real challenges will arise in the future. According to statistics, global ethylene glycol production capacity is set to see significant growth in the next 5 years. Abroad, numerous large-scale projects have been launched in North America, the Middle East, and South Asia; these facilities mostly use inexpensive ethane as a raw material, giving them strong international competitiveness. Domestically, 6 to 7 million tons of production capacity was planned to come online in 2019 ； From 2020 to 2025, the total production capacity of the projects planned to come online will reach 15 million tons. 　 The substantial introduction of new production capacity will subject China’s ethylene glycol industry to intense competitive pressure; it is expected that by 2015 the market will reach a state of complete oversupply, leading to a major reshuffle in the industry structure. 　 High import levels: The problem of high inventory levels of ethylene glycol in our country is also caused by high import volumes. 　 Our country is the world’s largest market for ethylene glycol, attracting supply from around the globe. According to statistics, China’s imports of ethylene glycol in 2018 reached 9.8 million tons, a 12% increase compared to the previous year. In terms of **import sources and regions, Saudi Arabia, Canada, Singapore, and Taiwan, China are the key players in China’s import market. In the first half of 2018, the polyester industry was in good condition; the price of ethylene glycol in China was favorable, leading to a significant increase in imports. In the second half of the year, domestic production capacity increased, while import levels remained stable. 　 Although syngas-based ethylene glycol production poses a threat to ethylene-based ethylene glycol, full replacement is not yet feasible, and import volumes of ethylene glycol are expected to remain high in the short term. 　 The growth in demand is coming to an end. Thanks to the recovery in the textile industry, the polyester sector, which is a major consumer of ethylene glycol, began to recover in the second half of 2016, and experienced a peak period of capacity expansion between 2017 and 2018. By the end of 2018, China’s polyester production capacity had risen to 54 million tons, corresponding to an ethylene glycol consumption of around 18 million tons. However, according to industry experts, the prosperity of the textile industry is expected to decline gradually starting from 2019, and the growth of polyester production capacity will also enter a downward phase; it is highly likely that the future demand for ethylene glycol will not keep up with the increase in production capacity. 　 It is worth noting that the China Petroleum and Chemical Industry Federation recently released the \"2019 Annual Capacity Warning Report for Key Chemical Products,\" issuing warnings regarding the capacity expansion of many products, including ethylene glycol. On April 8, the **National Development and Reform Commission issued the \"Guidance Catalog for Industrial Structure Adjustment (2019 Edition, draft for comments)\"). It recommends restricting the construction of ethylene glycol production facilities with a capacity of less than 200,000 tons per year, and ending the incentives available for such facilities with a capacity of 200,000 tons per year or more. The industry has already sounded the alarm regarding the increase in ethylene glycol production capacity.