Introduction: Today is the first anniversary of the listing of ethylene glycol. The ethylene glycol market has been frightened and surprised due to the identity change in the past year. Prices have been plummeting – almost trying to test the support of the cost line; the supply side has been delayed in realizing new capacity – the new production capacity commissioning table at the beginning of the year has expired.
The core keywords of the ethylene glycol market this year are price decline and mismatch between supply and demand. At the beginning of the listing, based on the expectation that new production capacity would be put into production, coupled with cautious macroeconomic expectations and poor demand prospects, the market was mostly short-positioned for ethylene glycol. With various funds all the way short-selling, the price decline started at the beginning of the listing. At this time, ethylene glycol tested the support of costs several times under the smooth decline from January to August. At the end of the year, it began to use corrections on the supply and demand side, and prices returned to rationality.
We sort out the market performance in the past year since its listing from the following aspects:
1. The correlation coefficient between price and inventory has decreased
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The price of accumulated warehouses fell, and the price increase after destocking was the ethylene glycol industry 18 years ago. The old almanac is more important. Judging from the correlation coefficient between the trend changes of the two, the correlation coefficient between the price trend of ethylene glycol and inventory changes in 2018 is 42%. Basically, every smooth accumulation cycle will be accompanied by an overall decline in market prices. Before listing, the fundamentals played a more obvious role in guiding market trends, and as ethylene glycol is a product that relies heavily on imports, fluctuations in terminal inventory play a relatively direct role in guiding market trends.
From January to early December 2019, the correlation coefficient between the two dropped to 24%. Before May, there was an obvious correlation between inventory accumulation and price cuts, but the correlation dropped significantly after the middle of the year. The direct guidance of terminal inventory on the market is reduced. Under the guidance of futures’ expectation thinking, the expected change trend of terminal inventory did not form a resonance for prices, but the low absolute value of year-end inventory (within 400,000) and the backward shift of the inventory inflection point once again stimulated the correlation between the two. .
2. Industry profits have shrunk significantly
Industry profits have shrunk repeatedly due to falling prices, and struggling near the cost line has become a bleak industry situation that production companies have to face during the year. To sum up, the average profit of the coal-to-ethylene glycol route during the year was -590 yuan/ton, down 130.11% from last year; the average annual profit of naphtha integration was 9.11 US dollars/ton, down 96.46% from last year.
The most direct impact of profit shrinkage is the overall operating level of the industry. During the year, the coal-to-ethylene glycol production capacity base expanded by 250,000 tons to 4.57 million tons, and the commissioning cycle of new equipment is mostly at the end of the year. In 2019, although the starting load of the coal-based ethylene glycol industry was not high, the production capacity base was enlarged and under the influence of the start-up and production cycle, the output increased by 7.59% month-on-month.
In comparison, the overall start-up of the integrated device is slightly embarrassing. At present, the total production capacity of the domestic ethylene glycol industry is 11.031 million tons, of which the total non-coal MEG production capacity is 6.461 million tons, accounting for 58.57% of the total domestic industry production capacity. Therefore, the start-up of non-coal-based plants plays a decisive role in the domestic total supply. , and this process route is switchable, so the price performance of related varieties directly affects the output of the EG factory.
In comparison, ethylene oxide has shown good resilience in 2018-19, and the industry’s profit value is better than that of ethylene glycol. With profit determining output, integrated equipment during the year It tends to produce more EO and less EG. The intuitive data shows that, with the production capacity base remaining flat, the total output of domestic integrated devices from January to November 2019 decreased by 0.99% compared with last year.
In the future, the proportion of new domestic ethylene glycol production capacity in large-scale refining and chemical integration will increase, so the fluctuations in prices and profits of related products will have an absolute impact on the start-up of EG.
3. The increase in supply has shifted significantly
The new production capacity is basically a true reflection of the reality of the expected fullness. The effective new production capacity released during the year is only 12.5% of the expected. The impact of comprehensive factors such as profit, technology, and capital are the main factors that delay the completion of new production during the year. Based on the reality of new production this year, more rational considerations should be given to new production on the supply and demand side in the later period.
4. Demand is slightly underestimated
Polyester maintained steady growth during the year. As of December, the new domestic downstream polyester production capacity was 3.29 million tons (the average annual production capacity growth rate was 5.9%). In terms of output comparison, from January to November 2019 Polyester output was 44.9 million tons, an increase of 8% from last year. While production has steadily increased, the overall profit performance of the polyester industry, although inferior to last year, is still remarkable.
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