2020 is an extremely special year. Since the beginning of the year, an epidemic has affected the social and economic development of China and the world. Our country has even made the decision to suspend work and production. People are staying behind closed doors, and domestic society is at a standstill. It was not until March and April that the country began to resume work and production, and the social economy began to recover. So under this influence, how did the ethylene glycol market perform in the first half of the year?
In economics, “the troika that drives economic growth, investment, consumption, and exports”, in In such a special social environment, our country’s investment, consumption, and exports have all suffered an unprecedented blow, including the chemical market. Ethylene glycol was the first to be affected, with market prices hitting new lows in recent years. As can be seen from the figure, the market price dropped from nearly 6,000 yuan/ton in 2019 to about 3,200 yuan/ton in April 2020, and then began to slowly recover.
Data source: Jin Lianchuang
A brief analysis of supply and demand
Why is the price of ethylene glycol declining so obviously? Let us look into the reasons. On the supply side, at the end of 2019, the price of ethylene glycol Inventories plummeted, causing market supply to exceed demand and prices showing an obvious upward trend. Manufacturers increased production in pursuit of profits. By the beginning of 2020, supply increased sharply, and the market became oversupplied again. At this time, inventories had risen to historical highs, and the epidemic affected the nationwide shutdown of production and production, causing the demand for ethylene glycol to drop sharply in early 2020. Destocking It’s easier said than done. The loose supply brought about by high inventory eventually feeds back to the market and results in a drop in ethylene glycol prices.
Data source: Jin Lianchuang
Expectations and Suggestions
For now, the price of ethylene glycol is low, and the contradiction between market supply and demand is prominent. The price is not expected to increase in the short term. If the price rises, it is recommended that manufacturers adopt a futures and spot operation mode. If the spot price falls, they can short futures arbitrage. However, with the recent support from relevant national policies, such as the stimulation of domestic demand by the “street stall economy”, the apparel industry will become popular in the market, and the improvement of the foreign epidemic situation will be beneficial to the terminal weaving industry, and then the downstream polyester will eventually increase accordingly. It is recommended to increase the allocation of downstream polyester production capacity, which will subsequently lead to an improvement in the ethylene glycol market. </p
