Affected by the dual impact of the surge in production capacity and the ongoing trade war between the United States and China, global ethylene glycol trade flows have undergone significant changes, and market analysts predict that global ethylene glycol prices will face further downward pressure in the first half of 2020.
Capacity Significant increase
Global ethylene glycol production capacity has grown by about 18% since the beginning of 2018, according to Platts.
China put into operation 1.9 million tons/year of new ethylene glycol production capacity at the end of 2018.
In 2019, the new ethylene glycol plants of Lotte Chemical, Sasol and MEGlobal in the United States have been put into operation, with a total production capacity of 1.7 million tons per year.
Before mid-2020, 3.2 million tons/year of new traditional ethylene glycol production capacity will be put into operation around the world, including:
Bianjia, Malaysia Lan Refinery and Petrochemical Company’s new 740,000 tons/year ethylene glycol production capacity in Malaysia
Hengli Petrochemical’s 900,000 tons/year ethylene glycol production capacity in Dalian
Zhejiang Petrochemical Ethylene glycol production capacity of 750,000 tons/year in Zhoushan, China
Nanya Plastics’ 828,000 tons/year ethylene glycol production capacity in Texas, USA
In addition, in early 2020 , China will also have another 1 million tons/year of coal-based ethylene glycol production capacity put into production, including:
Xinjiang Tianye Company’s 600,000 tons/year new ethylene glycol production capacity in Shihezi
Inner Mongolia Rongxin Chemical Company’s 400,000 tons/year ethylene glycol production capacity is located in Dalat.
Oversupply will continue
General Energy Consulting data shows that the total global ethylene glycol production capacity in November was 38.1 million tons per year, exceeding global demand by 10%-15%. The supply glut is expected to persist. In the United States, cheap ethane feedstock has promoted the expansion of ethylene crackers and ethylene glycol capacity, while in China, the main driving force for the expansion of ethylene glycol production capacity comes from the “reverse” strategy of the downstream polyester industry to improve the competitiveness of raw materials. “Integration” strategy and the use of domestic abundant and relatively cheap coal resources.
According to Platts estimates, the annual growth rate of the global ethylene glycol downstream polyester industry in 2020 will be approximately 4%. Therefore, demand growth for ethylene glycol is unlikely to keep pace with supply growth.
Manufacturers have fallen into losses on a large scale
Overcapacity caused global ethylene glycol prices to fall to the lowest level since April 2009 in August 2019, but analysts said it is unlikely that ethylene glycol prices will continue to fall sharply because record low profit margins have Prompting less competitive ethylene glycol producers to reduce operating rate levels.
With the exception of ethane-based ethylene glycol producers in the Middle East and North America, ethylene glycol producers operated at a loss for much of 2019. Platts data shows that from January to October this year, the average profit margins of naphtha-based, vinyl and coal-based ethylene glycol in Asia were -USD 13/ton, -USD 112/ton and -USD 48/ton respectively. Ton. From July to October this year, the average profit margin of naphtha-based glycol in Europe was -$17/ton.
Changes in trade flows
China After a 25% import tariff was imposed on ethylene glycol products originating from the United States in August 2018, global ethylene glycol trade flows changed in 2019. Because China, the world’s largest importer of ethylene glycol, maintains tariffs on ethylene glycol products imported from the United States, how the Asian market absorbs the increasing ethylene glycol production in the United States has increased market uncertainty.
China imported 10 million tons of ethylene glycol in 2018 and is expected to exceed this number in 2019. In 2017 and the first half of 2018, ethylene glycol originating in the United States accounted for only about 2% of China’s total imports, limiting the impact of mutual tariffs imposed by the United States and China on China’s ethylene glycol market. However, this has forced U.S. producers to explore other markets, as China was the U.S.’s second-largest ethylene glycol export market in 2017, behind Mexico.
Data from the U.S. International Trade Commission show that from January to August this year, U.S. ethylene glycol exports to China fell 58% year-on-year to 27,073 tons. However, U.S. ethylene glycol exports increased by 83% year-on-year during the same period, indicating increased demand for U.S. ethylene glycol outside of China. Belgium has surpassed China to become the second largest export destination of U.S. ethylene glycol. From January to August, its imports of U.S. ethylene glycol reached 138,406 tons, more than double the 58,983 tons in the same period last year.
Contract negotiations face challenges
Facts Negotiating the 2020 ethylene glycol term contract has proven challenging amid weak macroeconomic indicators and increased production capacity. Preliminary data from Chinese buyers shows that the discounts on the CFR China Price Index for the 2020 ethylene glycol term contract are as high as double digits, while the discounts enjoyed by buyers of the 2019 term contract are mostly low single digits.Number. Such offer levels have been resisted by most Asian ethylene glycol producers, who have already fallen into losses.
For Asian polyester producers, reliability of supply may be more important than deeper discounts because ethylene glycol is a secondary feedstock, a trader said. Therefore, contract volume demand from Asian end-users should remain high.
Buyers in Europe are increasingly reluctant to purchase local naphtha-based glycol because cheaper ethane-based glycol is available from the United States, forcing They changed the traditional fixed-term contract arrangement.
Although the contract price of ethylene glycol in 2019 is based on a fixed price between producers and sellers for monthly settlement, some European buyers have requested a floating price contract formula in 2020 that includes spot prices. factors, because there is a large price difference between the fixed-term contract and the spot in 2019. It is reported that some ethylene glycol producers have agreed to adopt a floating price contract formula, and one trader said that he is ready to add Asian spot prices to his 2020 European term contract formula.
The spread between European ethylene glycol spot and monthly contracts has averaged 24% so far in 2019, according to Platts. One trader said that despite the usual 15%-17% discount to 2019 term contracts, spot prices are still significantly cheaper. </p
