Chemical Fiber Headlines | Drone Attacks on Oil Fields, Dow Factory Device Explosion What will be the fate of the future waiting for ethylene glycol due to the frequent occurrence of unexpected events at the end of the year?

Recently, there have been continuous incidents in the foreign ethylene glycol industry, first drone attacks on Saudi oil fields, resulting in a reduction in the production of Saudi ethylene glycol plants; Then an explosion occurred at Dow Chemical's ethylene glycol 2# unit at its Louisiana plant, causing ethylene oxide to enter a state of force majeure.

On the other hand, according to the news of Axis on the 8th, the price of ethylene glycol in Asia fell to the lowest point in nearly two months, and market sentiment may continue to be affected by the upcoming new supply.

Weak earnings have forced producers to cut back

Due to the rapid development of domestic ethylene glycol market demand, domestic production cannot meet the demand, and the proportion of imported ethylene glycol consumption exceeds domestic production. Customs statistics show that in 2018, China imported a total of 978.96 million tons of ethylene glycol, a year-on-year increase of 103.85 million tons, an increase of 11.9%. Ethylene glycol imports accounted for 59.6% of the total domestic supply. Nevertheless, thanks to the rapid expansion of domestic production capacity and the rapid improvement of domestic supply capacity, the external dependence of ethylene glycol has shown a downward trend.

China's ethylene glycol capacity expansion – especially coal-based capacity – is believed to be to blame for the overall decline in ethylene glycol prices in Asia since 2018. China is the world's largest importer of ethylene glycol, with annual imports of more than 2015 million tonnes since 700.

Some ethylene glycol producers in Asia and the Middle East have reduced the level of glycol plant runs amid squeezed profits, leading to a decline in Chinese ethylene glycol imports in September.

A trader in Asia said: "Based on the current ethylene glycol prices, the main suppliers do not have too high profit margins. As we can see from China's latest import data, producers are cutting back on production amid weak earnings. ”

Domestic ethylene glycol imports are concentrated in the Middle East. Among them, Saudi Arabia is the largest source of domestic imports, accounting for 41.58% of the total imports; China's Taiwan, Canada, Singapore and Oman occupy the 2nd-5th place respectively, accounting for 10.07%, 9.27%, 7.69% and 7.44% of the import volume, and the top five regions in terms of import volume account for 75% of China's total imports.

New supply hits the market

Ethylene glycol supply in Asia will increase, with three new ethylene glycol plants expected to come online in the coming months leading up to the end of the first quarter of next year. Petronas Bienjaran Refinery and Petrochemicals (PRef-Chem) will come on stream its 75,11 mt/year ethylene glycol unit in Malaysia by the end of the year, while Hengli Petrochemical is likely to come on stream its 90,2020 mt/year ethylene glycol plant in China by the end of November. In the first quarter of 75, Zhejiang Petrochemical also plans to start production of a <>,<> mt/year ethylene glycol plant.

The expected increase in regional supply has been dampening buying sentiment over the past two months. The current spot price of ethylene glycol in Asian markets is higher than forward, indicating a spot premium since the end of October. A major importer of glycol said sentiment could become more pessimistic in the coming weeks as interest in buying goods in December has waned in anticipation of a new supply shock to the market.

In 2019, domestic ethylene glycol still has greater potential for capacity growth, and most of the current ethylene glycol projects under construction are concentrated in North China, Northwest China and East China, and it is expected to add 264.26 million tons of new capacity, with a capacity growth rate of <>%. However, due to uncontrollable factors, the actual new production capacity is expected to be slightly discounted.

Therefore, it is predicted that the domestic ethylene glycol production capacity is expected to reach 2019.1315 million tons in 2, but the total output of the industry is expected to be about 775.6 million tons. The overall demand increment of the ethylene glycol market remained at about 2019%; Affected by this, it is estimated that the import volume of ethylene glycol industry in 1042 will be 60.2019 million tons, and the import dependence will be more than 614%. The new polyester capacity is expected to reach 2019.200 million tons in 2020, and in view of the consumer pressure in <>, more than <> million tons of plants may be delayed until <>.

Table 1 Statistics of ethylene glycol investment and construction projects from 2019 to 2020

Polyester demand has slowed

The ethylene glycol market is also facing a slowdown in downstream polyester demand. The polyester industry is the most important downstream industry of ethylene glycol, and more than 87% of ethylene glycol is currently used in the production of polyester.

Due to the recovery of the textile industry, the main downstream polyester industry of ethylene glycol began in the second half of 2016, and entered the peak period of capacity expansion from 2017 to 2019. By the end of 2018, China's polyester production capacity rose to 5400 million tons, equivalent to about 1800 million tons of ethylene glycol consumption.

However, according to industry insiders, the prosperity of the textile industry will gradually decline from 2019, the growth rate of polyester production capacity will begin to enter a decline stage, and the ongoing trade war between China and the United States has severely hit the export of Chinese manufactured goods, including textiles and clothing, which are mainly made of polyester yarn and fiber. The future demand for ethylene glycol is likely to not keep up with the growth of production capacity.

According to sources, some major polyester factories in China are reducing production in response to rising inventories and falling profit margins. The average operating rate of polyester factories in China fell to 11% on November 1 from 89% a month earlier, according to Axis data.

According to a Chinese polyester producer, "The end of the year is usually the off-season for the polyester industry because downstream processors have completed export orders."

Therefore, in the face of competition from the explosive growth of production capacity and the cost advantage of foreign enterprises, there is not much time and space left for ethylene glycol. For ethylene glycol projects, it is necessary to maintain sufficient caution, and whether the new ethylene glycol projects are competitive needs to be carefully discussed and carefully decided.