There are many typhoons every year, especially this year. Waiting for the wind to stop and waiting for the ship to arrive has become the market’s expectation to release inventory every Thursday since August. Since August, the arrival of ethylene glycol terminals has always been in an embarrassing situation: the expected arrival is very full, but the actual supply of goods arriving at the port is very skinny.
Where have all the goods gone? Can the ship still be reliable? It has become the focus of attention in the market.
Direction 1: The downstream polyester production capacity is expanding, and it is just needed to increase the volume.
Polyester maintained steady growth during the year. As of November, the new domestic downstream polyester production capacity was 3.29 million tons (average annual production capacity growth rate 5.9%), which is equivalent to an average annual increase in demand for ethylene glycol of 1.1 million tons. Ton. While downstream polyester production capacity maintains steady growth, the growth rate of ethylene glycol production capacity has lagged behind expectations. As of the end of November, the actual effective new domestic ethylene glycol production capacity was 250,000 tons (Tianye + Tianying), while in December Although the production of Rongxin + Hengli is on the line, the contribution of actual production can basically be included in the 2020 cycle, so the actual effective production capacity growth rate of ethylene glycol during the year is 2.3%.
In terms of output growth, the output growth rate from January to November was 24%. In terms of breakdown, the MEG output growth rate from January to June was 37.58%, and the output growth rate from July to November was 10.10%. Due to price, profit and equipment reasons, domestic equipment maintenance has been relatively concentrated since the middle of the year, resulting in significant output losses, and some factories have even experienced contract discounts/cancellations. Under the domestic supply gap, terminal shipments began to increase significantly to make up for the demand gap, and part of the goods eaten up by demand gradually became apparent over time.
Departure 2: The goods did not arrive in time at the dock and were delayed by strong winds.
By comparing the expected arrival and actual arrival at the terminal this year, it can be seen that the gap between the expected arrival and the actual arrival will become smaller in the second half of the year. Obviously, under the combined influence of frequent typhoons in the summer, fog, strong winds and other force majeure, the overall shipping schedule has been moved back to a certain extent, which has also diluted the terminal inventory to a certain extent. The inventory base reached a periodic low at the end of November and the arrival cycle was extended, which caused the inventory accumulation cycle to shift back. The decline in terminal inventory in the second half of this year played a major role.
Direction 3: New production on the supply side has been repeatedly postponed, and the expected deviation has been corrected.
Since September, supply and demand have been balanced due to imports (arrival delays, imports are lower than expected) + new production capacity has been put into operation and has been moved later , the deviation is more obvious. The original estimated accumulation of dock and social inventory in November was due to the expected revision. The social inventory also changed from accumulation to destocking. In December, due to the increase in new additions, effective output was not released. Therefore, according to the estimation, in December The social inventory in March was basically hovering near balance.
Taken together, the current reality of low inventory at ethylene glycol terminals is a direct reflection of the changes in overall supply and demand during the year. Under the premise of futures expectations, the market’s expectations for fundamentals have basically begun to be reflected in the early stage, and Once a long-term deviation is discovered and the market needs to be corrected, it is easy to give the current market a certain opportunity. In fact, the production of ethylene glycol was not that fast in 2019, and the demand was not that bad. It is particularly important to find a closer pattern between expectations and reality. Compared with 2020, it is still a big year for the production of ethylene glycol. The ethylene glycol in 2020 will not be that bad. Anticipate and be cautious. </p
