The Asian ethylene glycol market will face a difficult year this year as some new large capacity comes online and China’s imports will decline due to increased local supply. In the absence of corresponding strong growth in demand, increasing new capacity will lead to lower factory operating rates.
In 2020, as China’s integrated refining unit Hengli Petrochemical has an annual output of 1.8 million tons Two phases of ethylene glycol plants with a total capacity of 1.8 million tons and Zhejiang Petrochemical’s ethylene glycol plant with an annual output of 750,000 tons have been put into normal operation. After a short period of silence in 2019, China’s ethylene glycol plants have once again entered a year of expansion. In the second half of 2020 , there are still 2.35 million tons of integrated refining and chemical equipment in operation, and nearly 3 million tons of new production capacity of coal-based ethylene glycol are planned to be put into operation. Therefore, overall, China’s new ethylene glycol production capacity will be released intensively in 2020, and growth will The rate will hit a new high in recent years. According to market understanding, a total of 3.3 million tons/year of new ethylene glycol production capacity is expected to be put into production in Asia between the end of 2019 and 2020, which will put pressure on a market already plagued by poor profits. A regional trader said 2020 will be a difficult year as many large plants are set to come on stream together. According to the ICIS supply and demand database, Northeast Asia’s total ethylene glycol production capacity will increase by 18% by 2020, reaching 19.83 million tons.
The increase in supply has become an established fact, but the demand situation is not optimistic!
Currently demand is recovering slowly but is still well below normal levels. Although nearly 30 countries around the world have gradually lifted restrictions since mid-May, clothing and other related goods are not the key purchasing needs of consumers; at the same time, affected by the increase in unemployment rate, consumers’ ability to pay for clothing is also limited.
During the epidemic, everyone needs to wear a mask when going out, which reduces the demand for clothing and accessories, especially Demand from ladies. The second quarter is usually the peak season for demand for polyester, which mainly comes from orders for spring and summer goods in the coming year. However, the current order volume is far lower than the same period in previous years. As of early June, China’s polyester operating rate had rebounded to 85%, the highest level since December 2019.
However, due to weak terminal orders and high inventory pressure, loom operations have rebounded but are still low. The vast majority of weaving manufacturers are in a state of extremely uneven production and sales. The recovery of demand is slow and the lack of order follow-up has led many weaving manufacturers to reduce their burden and production in April. Entering May, the order situation has only partially improved, and the overall market trend is still unclear. Conventional products are unsaleable, the market has no bright spot support, and it is difficult to ship products, causing weaving manufacturers to continue to enter an inventory accumulation cycle.
According to sample companies, the current inventory of gray fabrics in Jiangsu and Zhejiang is about 43 days, the same period last year was about 41 days, and the same period in 2018 was only about 25 days, which is a normal inventory. state. Judging from the current market conditions, domestic trade competition is fierce and foreign trade recovery is difficult. Weaving manufacturers will continue to accumulate inventory. If there is no substantial change in the market outlook, manufacturers’ operating rates may further decline.
Data from the National Bureau of Statistics of China show that from January to April 2020, China’s textile and clothing retail sales fell by 33% year-on-year; during the same period, China’s textile and clothing exports A year-on-year decrease of 24%. ICIS predicts that it will take 1-2 years for terminal demand to fully recover. The reason is that short-term stimulus policies are insufficient and the cash flow of downstream companies has become tight; in addition, concerns about a second outbreak of the epidemic have spread, and demand recovery will take longer.
The imbalance between supply and demand brews a bitter fruit, and high inventory remains a key challenge
Over the past few months, continued inventory buildup has been a key challenge facing the global ethylene glycol market. ICIS predicts that high inventories will be difficult to achieve rapid decline in the second half of the year, which will restrict price increases to a certain extent. In April 2020, the import volume of ethylene glycol was 886,200 tons, a year-on-year increase of 26.35%. Since the demand for ethylene glycol in many overseas countries has not yet fully recovered, ethylene glycol imports are expected to remain at a high level in June. As the import volume remains high in the short term, the main ports in East China have not yet seen obvious destocking signals. The fluctuation of weekly inventory is mainly related to the arrival of the ship and the speed of unloading that week. As of June 5, China’s East China ethylene glycol inventory exceeded 1.34 million tons, the highest level since the end of April 2019. At present, the inventory of liquid chemicals in East China’s main ports is tightening, and some reservoir areas are also gradually increasing storage fees. The current inventory of ethylene glycol in the main port is higher than the same period last year, and the overall inventory pressure is relatively high.
EB2 outside China Alcohol markets such as Europe and the United States are also facing high inventory pressure. European ethylene glycol stocks also reached a historical peak in May. Belgian refrigerant manufacturer ARTEO halted production in early May and declared force majeure on ethylene glycol storage. In order to alleviate the pressure of high inventories in the local and European regions, U.S. ethylene glycol has diverted goods to Asia for sales, which has brought pressure to Asian ethylene glycol producers that are already under pressure.�Additional challenges.
Profits decline. Asian ethylene glycol producers consider cutting production. As crude oil prices gradually recover, global naphtha ethylene glycol production profits continue to decline. At present, naphtha production in Asia and Europe Ethylene glycol has become a marginal production route globally.
Affected by this, Asia such as Japan and Taiwan, China have a total of 1.7 million tons/year ethylene glycol devices planned in Parking from June to August.
China’s coal-to-ethylene glycol production is also facing high cost pressure. The current average start-up is only about 30%, and the average start-up for the whole year is expected to be 30-40%.
In Europe, some ethylene glycol manufacturers in Germany and the Netherlands postponed their equipment maintenance plans from the original first quarter to June or the third quarter due to the gathering of people caused by equipment maintenance. .
U.S. ethane-to-ethylene glycol profits have fallen continuously over the past 24 months and in early June fell to their lowest level since January 2014, the first time ICIS began tracking The profit data.
Among them, between March and May 2020, due to the collapse of crude oil prices, ethane to ethylene glycol is no longer even the most cost-competitive production route in the world. However, out of confidence in the recovery of oil prices, U.S. ethane-to-ethylene glycol producers have stated that they will not cut production in the short to medium term and will maintain production at a high level.
As for the trend of inventory changes in the later period, we believe that the main port may return to accumulated inventory in late June. On the one hand, overseas installations have less maintenance, and it is reported that the import volume in June is still large. In the latter part of the third quarter, we can pay attention to whether the supply of ethylene glycol imports will decline due to the recovery of demand in some countries; on the other hand, many domestic units in June There are plans to restart coal-to-petroleum and petroleum-to-petroleum ethylene glycol units, but considering the restart time of the units, actual production time, and transportation time, the increase in ethylene glycol supply pressure on the market may have to wait until around late June. Therefore, the overall supply and demand pressure of ethylene glycol is acceptable in the early part of June, and the inventory accumulation at the main port is not large. If there are fewer cargoes arriving at the port during the week, there may even be a slight destocking. However, if coal chemical production increases in late June, then The main port may once again enter a state of overstocking, and the inventory pressure in the tank area will increase again. </p
