Introduction: International crude oil prices have plummeted again for a long time, and short-term pessimism has been released. Bulk chemical products are all green, and ethylene glycol has fallen sharply by 150-200 yuan/ton in intraday spot discussions. Is it a trend or blindness? Let’s take a look at the analysis.
Crude oil:
Figure 1 International crude oil price trend chart
Source: Longzhong Information
On the evening of July 6, 2021, the Biden administration held talks with Saudi and UAE officials, hoping An agreement to increase production can be reached to prevent oil prices from rising too quickly, and the market is worried about the potential risk of a price war among OPEC+ oil-producing countries due to differences. International oil prices have fallen the most since the end of May. NYMEX crude oil futures 08 contract fell by US$1.79/barrel to 73.37; ICE Brent oil futures 09 contract fell by US$2.63/barrel to 74.53, a drop of 3.41%, the largest decline since mid-May.
After this round of pessimism was released, with the disclosure of demand and inventory data in the northern hemisphere starting from July; and the contradiction between Saudi Arabia and the UAE is not extremely acute and completely uncoordinated, The probability that the UAE will rashly increase production or start a price war is low; everyone is still optimistic about the third quarter, and this correction is only a short-lived event.
Supply:
Figure 2 Domestic weekly production of ethylene glycol Trend chart
Source: Longzhong Information
Currently, existing companies The overall start-up of the equipment has not changed much. Early maintenance companies have restarted one after another. This week, Yangmei Shouyang, Yongcheng Yongjin, and Qianxi Coal Chemicals have reported boiler ignition news. It is expected that products will flow into the market next week. In addition, the installation loads of individual companies have increased slightly. Fluctuations; as for the newly invested equipment recently, the Jianyuan plant in Inner Mongolia is being debugged and will be tested again in the near future; polyester-grade products have been produced in Sanning, Hubei, and the debugging of the equipment has been basically completed. Some companies have stated that they have received their products; by then Daily supply may increase by around 4,000 tons. (Since July 7, 2021, the production capacity base of domestic ethylene glycol devices has been adjusted: Hubei Sanning has added a 600,000-ton unit, and the production capacity base has been adjusted to 19.411 million tons, of which the coal-to-ethylene glycol production capacity base has been adjusted to 6.87 million tons; the non-coal-to-ethylene glycol production capacity base remains at 12.541 million tons.)
In terms of imports, due to the poor operational stability of overseas units, the overall import volume has not increased, and The weather and epidemic situation have recurred, the terminal operation cycle has been extended, unloading has been lower than expected, and the overall explicit inventory increase in the market has been small.
Taken together: international crude oil prices have plunged again for a long time, the cost of ethylene glycol lacks strong support, and the increase in short-term supply is negative, and pessimism is concentrated After the release, the spot price fell sharply by 150-200 yuan/ton during the day. However, in reality, crude oil is expected to remain strong, and cost support for the chemical sector may recover again.
From a fundamental point of view, the release of new production capacity and the gradual restart of maintenance equipment have led to a significant increase in overall supply. As for downstream polyester demand, 1 million tons of new polyester are planned for mid-to-late July. With the release of increased production capacity, factory raw material inventories are moderately low, and cost inventories are not high, the overall demand for polyester is high and stable.
It is a good game to be short, and it is normal for market discussions to fluctuate in a range. Industry players are reminded not to panic and blindly follow the decline. It is expected that ethylene glycol will fluctuate in a range in July, specifically looking at 4780 yuan/ton – The price fluctuated between 4,950 yuan/ton and 5,100 yuan/ton. </p
