In the first half of 2020, the crude oil price fell deeply, and the overseas epidemic situation became more and more serious. The chemical products fell off cliff, and ethylene glycol was no exception. After the “11th” festival, the eg price was relatively strong, driven by the traditional peak season and the periodic improvement of internal and external orders.
Eg double benefits centralized release
Li WANYING, a senior analyst at the East China Sea Research Institute, believes that recently, ethylene glycol is favorable for centralized release. First of all, due to the proper control of domestic epidemic situation, it is said that Christmas orders from India and other countries have been transferred to China. These orders should be mainly cotton spinning, indirectly driving the polyester market. Secondly, in terms of domestic trade, the retail sales of 100 key large-scale retail enterprises increased by 8.5% year-on-year during the national day, which was 14.3 percentage points higher than that in the same period in 2019.
From the perspective of the main category markets, the retail sales of clothing category grew brilliantly, with a year-on-year growth rate of 16.8%. Among them, the growth rate of men’s clothing, women’s clothing and children’s clothing was 23.9%, 13.1% and 27.3%, respectively, which was higher than the market expectation, which rekindled the industry’s expectation for the peak season. In addition, the “cold winter” expectation brought by La Nina effect increased the market demand for warm fabrics in winter.
Supply side contraction logic is about to turn
Since the beginning of this year, affected by factors such as large fluctuations in costs, the overall profitability of the ethylene glycol unit is poor, and the oil head unit once lost money. With the price repair since the third quarter, the profitability of many devices has improved.
It is expected that the ethylene glycol production capacity will be increased in the later part of the fourth quarter. The 400000 T / a oil production unit of Sinopec will be put into operation on October 26, the 400000 T / a unit of Xinjiang Tianye (600075, Guba) is in operation and commissioning, and the ethylene glycol unit of Henan Longyu with a capacity of 200000 t / A is planned to be commissioned in October.
Founder medium term futures Sui Xiaoying believes that although the current supply and demand of ethylene glycol is in the process of going to the warehouse, the release pressure of long-term production capacity will still suppress the space for futures price to strengthen.
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According to Li WANYING’s analysis, the capacity of domestic ethylene glycol plant from syngas reached 5.79 million tons, accounting for 39% of the domestic ethylene glycol production capacity. According to the amount of 3 million tons, the total production capacity of polyester at the end of the year is about 63.3 million tons. Even if the comprehensive operating rate is 90%, the average monthly ethylene glycol demand is about 1.8-1.9 million tons. By the end of this year, the production capacity of ethylene glycol is expected to be 15 million tons.
Demand uncertainty in the fourth quarter
“The biggest question at the moment is whether these benefits can continue to boost the market in the fourth quarter.” Li WANYING said that the overseas epidemic situation is still the biggest uncertainty, at least from the data point of view, the possibility of a second outbreak of infection in autumn and winter is relatively high. For the textile and clothing terminal, the most serious period of the epidemic in the first half of the year led to many clothing stores losing money and closing down, and it is difficult to fundamentally reverse the shrinking demand under the background of the epidemic situation.
On the domestic side, the crowded orders and rush orders in October will obviously ease in November, and the market speculation atmosphere will return to rationality. In terms of raw material procurement, according to the CCF research results, the downstream upstream has been actively replenished in the early stage, and the production and sales volume has continued to be large for half a month. At present, the average stock of raw materials on hand in the downstream reaches is generally more than 25 days, and some parts are higher for 1-2 months. Both weaving and texturing, recent procurement has begun to be reasonable, and polyester production and sales are gradually falling. The market has been waiting for the profit is often infinitely amplified, as investors still need to pay attention to the effective continuation of the peak season. For raw materials PTA and MEG, once the demand shows signs of decline, fundamental pressure will return to the disk.
Considering their respective import conditions, ethylene glycol needs a long-term shutdown capacity of 4.5-5 million tons. Even if 1.2 million tons of ethylene long-term shutdown units are deducted, 3.5 million tons of plant shutdown are still needed. The coal chemical industry should be controlled below 35%, which can maintain the balance of supply and demand. At present, the overall load of ethylene glycol has significantly recovered from the previous low level. Li WANYING reminded investors that investors should carefully evaluate the sustainability of the peak season. In the medium and long term, the 01 contract still has downward momentum.
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