Breaking news: An explosion occurred at Lotte Chemical in South Korea, causing an unexpected shutdown of 730,000 tons of MEG
According to Yonhap News Agency reported that at around 2:59 a.m. on March 4, a huge explosion occurred at the Naphtha Cracking Center (NCC Naphtha Cracking Center) of Lotte Chemical Daesan Plant in Xishan. The earthquake was strong in surrounding buildings and residences, and most facilities were damaged. The accident injured 11 residents and workers, but no casualties were reported yet. It is reported that the ethylene cracking unit of Lotte Chemical’s Daesan plant involves production capacity of: 1.1 million tons of ethylene, 550,000 tons of propylene, 190,000 tons of butadiene, 577,000 tons of styrene, and 730,000 tons of MEG. Currently, most of the units have been shut down.
How much impact will the parking of 730,000 tons of MEG have on the polyester industry chain in the near future?
Overall, South Korea currently has more than 1.5 million tons of MEG production capacity, and the production capacity in Dashan is more than 800,000 tons. Among them, Lotte Dashan has two lines of 30W and 40W. Our country imports 30,000-50,000 tons of MEG from South Korea every month. If the follow-up factory shuts down due to lack of cracking raw materials, it is expected to affect the import volume after March. The impact is expected to be around 20,000 tons in a single month, accounting for 83% of our monthly Ten thousand tons (2019 average) accounted for about 2.4% of the import volume and accounted for 1.36% of the apparent monthly consumption in 2019. Less affected.
At the same time, since the COVID-19 epidemic, the overall inventory accumulation in February has been relatively high. In February, due to traffic control, a large amount of MEG inventory accumulated in the storage tanks of the production plant, resulting in an increase in inventory that was largely reflected in the increase in hidden inventory.
New production capacities such as Zhejiang Petrochemical and Hengli have been put on the market this year, and supply and demand are in short-term excess.
The commissioning of three large integrated units has brought about a significant increase in output:
Hengli 1#900,000 tons
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Hengli 2#900,000 tons
Zhejiang Petrochemical Phase I: 750,000 tons
After the holiday, the price of MEG dropped to around 4,300 and fluctuated. Due to the sluggish price, the operating rate of coal-based MEG has dropped significantly recently, but the reduced output cannot offset the increase brought by the new production capacity. At present, MEG still continues to accumulate inventory. The port inventory returned to the normal level of 850,000 tons at the end of February. It is expected that the hidden inventory will be transferred to the port inventory in the future. Therefore, the impact of reduced imports from South Korea will be minimal.
Under the pressure of accumulated inventory, the progress of polyester raw materials focuses on the destocking situation of downstream weaving
The expected resumption of downstream work has been repeatedly postponed. Polyester inventories are severely overstocked. The polyester load has now rebounded, and more than 1 million tons of polyester plants are currently being heated up and restarted. According to our estimates, the polyester load rebounded rapidly in early March and rose to around 90% by the end of the month. Under such circumstances, the average load in March was around 83.5%. High polyester inventory may suppress the progress of polyester factory load improvement. The follow-up focus will be on inventory digestion.
Supply pressure is high, and it is only a matter of time before inventory reaches its peak. 2020 is a big year for the production of polyester raw materials, such as Zhejiang Petrochemical, Dalian Hengli, etc. Affected by the epidemic after the holiday, upstream production continued, while the downstream stagnant polyester load dropped significantly, leading to a rapid accumulation of inventory. Affected by the epidemic in February, the polyester load dropped significantly, and ethylene glycol and PTA stocks accumulated rapidly. Currently, PTA social stocks are To the level of 3 million tons, a record high. At the same time, due to the impact of traffic control, MEG inventory accumulated in large quantities in the storage tanks of production plants, resulting in an increase in inventory that was largely reflected in the increase in hidden inventory. If construction starts at the current low level, inventory will remain at this level in the first half of the year – considering that there are still devices to be put into production in the future, high inventory may become the norm in the future.
Under inventory pressure, PTA has to reduce its load to relieve inventory pressure. According to the current maintenance plan and operating rate Extrapolating, the average operating rate in the first half of 2020 was 89-90%, which was the level during the PTA recession in 2015-2016.
But even under this situation, due to the slow resumption of downstream work and the yet to recovery of end consumption, polyester raw material inventory pressure is expected It will last until late March.
Currently due to the impact of the new coronavirus, global demand is under certain pressure, and the impact of this device’s accident on market sentiment is weaker than usual. The short-term market lacks a clear direction and is mainly driven by emotions in the near future or due to the impact of the epidemic. From a fundamental point of view, the polyester industry chain is relatively weak. On the one hand, the operating rate is gradually increasing and supply pressure is increasing. On the other hand, downstream demand has not yet fully recovered and there are many stocks in the early stage, making it more difficult to continue to reduce inventory. Generally speaking, the fundamentals are bearish at present, but various policies have been introduced around the world to stimulate the market. Short-term optimism is expected to continue to stimulate the market. The short-term rebound has limited space, and it will still be under pressure after returning to fundamentals in the later period. At present, we still need to be alert to the risk of the global epidemic escalating.��A chain impact on the supply and demand of the polyester industry chain. </p
