The ethylene glycol market remains weak

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The Ethylene Glycol Market Remains Weak Author/Source: Sinochem New Network Date: April 8, 2019 Clicks: 9 The Ethylene Glycol Market Remains Weak 645 views Author: Li Dongling Source: China Chemical Industry News, April 8, 2019 Bookmark Since March, the ethylene glycol market has shown a slight improvement after a period of weakness. On April 1, the reference price for ethylene glycol in the domestic market was 5,250 yuan per ton (the same unit is used hereafter), representing a 1.94% increase compared to March 1. Industry experts generally believe that although the ethylene glycol market experienced a short-term rise due to factors such as tax cuts and rising costs, it will take some time for the market to turn around completely, given the high inventory levels and an oversupply situation that characterize the current market conditions. 　　High inventory levels “At present, the main factor restricting the upward trend in the ethylene glycol market is the high level of inventory. ”Zhang Shuai, an ethylene glycol analyst at CICC Online, believes so. 　　According to Zhang Shuai, as per past practice, the polyester industry downstream reduces its production capacity on a seasonal basis during the Spring Festival, which is likely to lead to higher inventory levels of ethylene glycol in the first quarter. Moreover, the load on ethylene glycol production facilities will also increase steadily after the holiday. Currently, the operating rate of ethylene-based ethylene glycol plants is 86%, while that of coal-based ethylene glycol plants is 73%; overall, the load has increased by 4.86% compared to the previous week. Increasing supply has led to a continuous rise in port ethylene glycol inventories, which are now at relatively high levels compared to recent years. After this year’s Spring Festival, port inventory of ethylene glycol exceeded the 1 million-ton mark, rising to over 1.1 million tons, and in March it further increased to 1.3 million tons. There are even reports that storage companies have restricted the receipt of products due to limited tank capacity. 　　Not only that, but the import supply of ethylene glycol also remains at a high level. According to data from the General Administration of Customs of China, ethylene glycol imports in February amounted to 700,000 tons, representing a 0.1% increase on a year-on-year basis; the cumulative imports for January and February totaled 1.71 million tons, showing a 11.7% increase compared to the previous year. On March 28, the inventory of ethylene glycol at ports in East China was approximately 1.357 million tons, of which 924,000 tons were stored at the Zhangjiagang port – a level significantly higher than that in the same periods over the past few years. 　　“In March, the ethylene glycol market experienced a short-term upward trend, primarily due to the strong performance of markets for raw materials such as naphtha and ethylene, which provided solid cost support, as well as the positive effects of China’s policy to reduce value-added tax. Currently, as these positive factors are gradually absorbed, the spot goods that traders had stocked up on earlier are entering the market, creating pressure to sell. Therefore, the ethylene glycol market will correct under the pressure of high inventory levels. ”Zhang Shuai provided further analysis. 　　Significant capacity expansion \"Since August 2018, the production capacity of ethylene glycol both domestically and internationally has expanded significantly, leading to a situation of relative overcapacity.\" ”Wang Tingfu, an analyst at Dongwu Futures, said that the market will still face significant pressure from new production capacities both domestically and internationally this year, making it difficult for ethylene glycol prices to rise. 　　For a long time, China’s ethylene glycol production capacity has been concentrated in the Sinopec and CNPC groups. In recent years, with the rapid development of the coal-based ethylene glycol industry, production capacity in this sector has seen swift growth. In 2018, China’s new ethylene glycol production capacity reached 2.22 million tons, representing a growth rate of 26.63%; the total ethylene glycol production capacity rose to 10.555 million tons, with a compound growth rate of 11.27%. Furthermore, between 2019 and 2020, new production capacities totaling around 6.5 million tons per year will come online, with 13 companies including Shandong JiuTai at 1 million tons per year, Inner Mongolia Conaille at 300,000 tons per year, Hengli Petrochemical at 900,000 tons per year, and Zhongan United at 900,000 tons per year. It is estimated that the overall supply growth rate of ethylene glycol this year will be around 10%, which will put significant pressure on the market. 　　In addition, international ethylene glycol production capacity is set to increase significantly in the next two years; for example, the capacity of ethane-ethylene-ethylene glycol plants under construction in the United States is around 2.5 million tons per year. There will also be new production capacities in Iran and Malaysia, all of which will put pressure on the domestic ethylene glycol market. 　　Decline in downstream demand While the production capacity of ethylene glycol is increasing rapidly, the downstream polyester industry has entered a period of adjustment, with declining demand growth and significant pressure due to overcapacity. 　　According to Lu Difeng, information manager at Huari Information, the polyester industry began to recover in 2017 after experiencing a downturn over four to five years, and polyester production reached a new peak in 2018. Among them, the increase in polyester production was over 5 million tons; with the restart of old production facilities that had been shut down, the total increase in polyester production reached over 7 million tons. However, the polyester industry is set to enter a period of adjustment this year, with an estimated production growth rate of 6%–8%, representing a decline from the 11.3% growth rate seen in 2018. 　　“At present, polyester filament manufacturers are experiencing sluggish production and sales; the operating capacity of weaving machines in Jiangsu is around 70%, companies have ample inventory, and there is little willingness to make purchases. Benefiting from low raw material costs in 2016 and 2017, retail clothing companies began to increase their inventory levels. As competition intensifies over capacity expansion across different regions and profits are under pressure, the growth rate of integrated looms has declined this year. Under the influence of weak overall demand in the polyester industry and ample supply from upstream sources, the sluggish condition of the ethylene glycol market is unlikely to improve. ”Lu Difeng analyzed.