1. Influencing factors
1. Cost
The main preparation methods of EG are coal and oil, while TA Mainly made of naphtha, the specific proportion is as follows:
As a whole, the proportion of ethylene glycol in coal production continues to increase, reaching a peak in 2019. Annual supply exceeds oil production. Since the coefficient of coal-making technology is large, when the proportion of coal-making increases, changes in coal prices will have a greater impact on the price of EG.
2. Supply
The production capacity launch cycle is also a major factor in price Important influencing factors: The actual increase in supply can be obtained by combining the load of the year. Compared with TA, half of EG’s supply depends on imports, so the total supply needs to be evaluated based on the import volume.
II. Stage Analysis
History There are a total of 9 periods of large fluctuations in the TA-EG spread:
1. Main impact: EG. Since October 2014, downstream loads have increased, EG imports have decreased, and EG destocking has begun to rebound. At the same time, coal prices have remained relatively strong. However, due to the loosening of production cuts by the three giants and good processing fees, TA continues to accumulate inventory, and a large amount of spot goods are thrown into the futures market to suppress prices.
2. Main influence: TA, EG. In March 2015, Far East went bankrupt. In April 2015, the Tenglong PX explosion caused Xianglu’s 4.5 million tons of TA to stop. The monthly supply changed from a surplus of 250,000-400,000 tons to a shortage of 200,000-300,000 tons, and TA was quickly destocked. At the same time, the stock market crashed and EG began to accumulate funds as downstream expectations deteriorated.
3. Main impact: EG. Crude oil fluctuated at low levels, coal prices rose rapidly, and inventories were at low levels, causing EG prices to rise.
4. Main impact: EG. Due to high prices at the end of 2016, EG imports increased significantly in the first quarter of 2017, and port inventories increased rapidly, resulting in a large decline in EG.
5. Main impact: TA. The macro rebounded in June, and EG bulls are relatively strong. TA processing fees stood at 500, and then remained high throughout the year, restraining TA growth. Although TA continues to destock, there are expectations for the restart of equipment (Reignwood 1.4 million tons, Fuhua 3 million tons, accounting for 9% of total production capacity), and the market performance is weak. In the first quarter of 2018, TA quickly accumulated funds.
6. Main impact: TA. Polyester has a high load and strong demand from April to July. Due to equipment maintenance, TA manufacturers repurchase it in the spot market, and it is in a net export situation, which causes TA to continue to be destocked, processing fees and loads to rise.
7. Main impact: TA. TA’s high processing fees lead to an increase in load. Downstream, due to the high level of raw materials, the polyester load dropped from 96% in August to 80% in late September. TA has changed from destocking to accumulated storage, and processing fees have been reduced accordingly.
8. Main impact: TA. In October, due to the corresponding reduction in processing fees, TA had a large number of equipment overhauled and entered the destocking channel. EG8 has a high load in September and continues to accumulate inventory. Since 10/18, crude oil has fallen, and both TA and EG have followed suit.
9. Main influence: TA, EG. The OTC options incident broke out in TA in July, and EG rose rapidly after the attack on Saudi Arabia in September.
3. Summary
The main downstream products of EG and TA are polyester, so they are undergoing The main considerations when doing EG-TA arbitrageConsider both the cost and supply side. According to history, inventory changes are a direct factor, and ethylene glycol is highly dependent on imports. Liquid chemicals are sensitive to cost changes, and there will be more factors that affect inventory, so price fluctuations are greater than TA.
The current stage is the beginning of a new round of EG-TA arbitrage. EG has faced several consecutive months of import reductions, significant supply reductions, and inventory lower than the same period in history, while TA’s inventory has been dumped into far-month warehouse receipts and has remained at a high level for a long time. With oil prices rising, the EG-TA arbitrage of the 05 contract is expected to continue to expand. The risk of this position is that TA’s equipment will be unexpectedly overhauled due to the continued compression of processing fees. But on the other hand, even if TA is overhauled, it is difficult for the inventory inflection point to appear. </p