1. At the beginning of the year, China implemented large-scale tax cuts, increased fee reductions, and increased expenditures
On January 15, the Ministry of Finance released news to increase tax cuts. Reduce fees and increase spending to implement larger tax cuts. Assistant Minister of Finance Xu Hongcai said that tax cuts and fee reductions should be stepped up and spending should be increased. First, increase tax cuts and fee reductions. On the one hand, we will implement larger-scale tax cuts, adhere to the combination of inclusive tax cuts and structural tax cuts, focus on reducing the burden on the manufacturing industry and small and micro enterprises, and support the development of the real economy. On the other hand, we will promote more obvious fee reductions, clean up and standardize local charging items, and increase the investigation and rectification of arbitrary fees. Second, increase fiscal spending. According to the economic situation and various expenditure needs, the scale of fiscal expenditure will be appropriately expanded. At the same time, we will significantly increase the scale of local government special bonds to support the construction of major projects under construction and make up for shortcomings.
After this news was released, China’s stock market and commodity futures reacted strongly and rebounded one after another. As a result, crude oil ended its continuous decline overnight, with an increase of nearly 3%.
Ethylene glycol also ended its continuous adjustment situation and began to increase its volume from the bottom, which has the effect of breaking away from the bottom. In particular, the main contract performance of Dalian Commodity Exchange was relatively strong, from the previous discount to recent month spot prices, to There has been a certain premium on the spot price. On the one hand, the reason is that China’s implementation of tax cuts has been a great benefit to the macro environment. The weak trend of ethylene glycol in the early stage is largely due to market participants’ negative outlook on the overall economy in 2019. On the other hand, the downstream demand for ethylene glycol mainly comes from polyester factories, and the terminal demand of polyester factories mostly comes from manufacturing and small and micro enterprises. It is the key target of this tax reduction and burden reduction. After the burden on enterprises is reduced, the Polyester demand may increase significantly, which will also offset some concerns about oversupply due to increased ethylene glycol production capacity.
2. The long-term cumulative supply pattern of ethylene glycol port inventory has changed after the New Year
Ethylene glycol supply pattern in 2019 The main reason for the changes and the continued accumulation of inventory in the main port is due to the rapid growth of China’s ethylene glycol production capacity last year. In 2018, China’s new ethylene glycol production capacity was 2.02 million tons. The new production capacity was calculated as 80%, and the monthly new supply The volume is about 1.6 million tons. The growth rate of production capacity in 2019 can be described as intensifying. 2019 is not only a year of rapid growth in China’s production capacity, but also a year of rapid growth in production capacity in Asia and the United States. Currently, a set of equipment in the United States with an annual output of 700,000 tons It has been put into production, and qualified products have arrived in Asia. In addition, a 750,000-ton unit of Petronas has entered the commissioning stage ahead of schedule, while China’s Zhejiang Petrochemical (annual output of 800,000 tons), Hengli Petrochemical (annual output of 900,000 tons), Multiple ethylene glycol aircraft carrier-level units including South Asia’s US Line 2 (800,000 tons) are scheduled to be put into production in 2019. In addition, some Chinese coal-based plants are being launched. It is expected that the world will have 7 million tons of new production capacity plans in 2019. The production is twice that of 2018. This supply situation will break the long-term supply and demand balance of ethylene glycol and turn it into overcapacity. Therefore, the current high inventory and relatively low price will become the norm in the ethylene glycol market. .
3. The reduction of value-added tax has slightly promoted the rise of ethylene glycol
From April 1, 2019, manufacturing The value-added rate tax rate in industries such as the industry has been reduced from the original 16% to 13%. As soon as this news came out, the most direct impact on ethylene glycol was immediately apparent. Boosted by this, the spot price rose rapidly. The goods in March were relatively In April, the discount for goods in April quickly changed from the previous discount of 50 yuan/ton to a premium of 50 yuan/ton. The basis change changed by 50 yuan/ton at the moment the news came out. After reducing the value-added tax, it first reduces the production cost of the enterprise. However, since the ethylene glycol industry chain extends from upstream crude oil to terminal clothing, after the 3% profit is distributed to various industry chain products, its influence will be greatly reduced. Therefore, only Only enterprises with a relatively complete industrial chain can fully enjoy the benefits brought by tax cuts. In addition, it is also a benefit for products with larger profits. However, the current profit level of ethylene glycol factories is not optimistic, and tax cuts will benefit them. When the cost impact is limited, it is difficult to have a substantial benefit to the market from the cost aspect.
4. Competition in the ethylene glycol production capacity expansion market intensified at the end of the first quarter
On March 25, 2019, Heng The first-line MEG tower (1C-620) and the second-line MEG tower (2C-620) of the ethylene glycol unit of the 1.5 million tons/year ethylene project successfully completed the hoisting operations. At this point, the hoisting work of the MEG tower of the ethylene glycol unit has been completed. The MEG tower is the last link in the production of ethylene glycol and is responsible for the separation of ethylene glycol and polyethylene glycol. Future ethylene glycol products will be produced from here. At present, the Hengli Ethylene Project has entered the peak period of equipment installation, and the installation work is in full swing. This project is the world’s largest ethylene glycol unit with single production capacity and is scheduled to be completed on September 30, 2019.
On April 8, 2019, in the Yaojiagang Chemical Industry Park 3 kilometers away from the Yangtze River, Yichang City’s key relocation project-the Hubei Sanning Chemical Ethylene Glycol Project with a total investment of 10 billion yuan is under construction Construction is in full swing, vehicles are flowing in and out, and the main project is rising from the ground. At present, the project is progressing smoothly. The hardening of roads and underground pipes in the factory area have been basically completed. 40% of the main civil engineering work of the main chemical equipment has been completed. 20% of the installation of boilers and air separation units has been completed. It is expected that the first phase will be completed and put into operation by the end of the year.
On April 16, 2019, Wang Weiguang, deputy mayor of Tongliao Municipal Government, presided over the meeting�A special meeting was held to study and promote matters related to the restructuring of the Cornell coal-to-ethylene glycol project. The on-site civil construction of the first phase of Fude Cornell’s 300,000 tons/year ethylene glycol project started on May 20, 2013. On-site construction officially started in April 2014. It was originally planned to be fully commissioned in September 2016. Later, due to funding problems, the project was suspended. The 300,000-ton coal-to-ethylene glycol project in Inner Mongolia, which has been suspended for more than 2 years, has come back to life.
On April 19, 2019, Shanxi Meijin Huasheng Chemical New Materials Co., Ltd. and Donghua Engineering Technology Co., Ltd. signed the “Shanxi Meijin Huasheng Chemical New Materials Co., Ltd.” with a total price of 1.789 billion yuan. The company’s tail gas production of 300,000 tons/year ethylene glycol co-production LNG project PC general contract contract” and the “Shanxi Meijin Huasheng Chemical New Materials Co., Ltd. tail gas production 300,000 tons/year ethylene glycol co-production project” with a total price of 25 million yuan LNG Project PMC Project Management Contract”. Shanxi Meijin Huasheng New Chemical Materials Co., Ltd., a wholly-owned subsidiary of Shanxi Meijin Energy Co., Ltd., plans to build a 4 million-ton coking and extended supporting project in Qingxu County Economic Development Zone, with an annual output of 300,000 tons of ethylene glycol. , 155,000 tons of LNG and 150,000 tons of sulfuric acid.
5. The China-U.S. trade war resumed and tariffs were imposed on $200 billion of goods
In early May, the Trump administration announced The increase in tariffs on US$200 billion of Chinese goods exported to the United States from 10% to 25% has caused an uproar in the chemical market. Crude oil and related chemical commodities have experienced violent fluctuations around this news. Ethylene glycol is facing such a major threat. The emergence of negative news has shown a certain degree of resilience, and the optimism of some market participants has begun to spread. The main logic of their bullishness is that after the continuous decline of ethylene glycol, most ethylene glycol plants are facing greater cost pressure and have to reduce labor insurance. The price operation idea is obvious, and ethylene glycol has a greater chance of being supported at the cost line, but the market outlook is still not optimistic.
6. The Sino-US trade war intensified and the RMB continued to depreciate
Affected by the Sino-US trade war, after entering May, The RMB exchange rate has depreciated sharply against the US dollar, with the depreciation rate reaching 2.5%. The cost of ethylene glycol imports has increased by more than 100 yuan/ton due to the impact of the exchange rate, and my country’s ethylene glycol is a country that is highly dependent on imports. 1-4 In January, my country’s cumulative import volume of ethylene glycol was 3.56 million tons, an increase of 180,000 tons compared with the same period last year. The total output of domestic equipment was 2.63 million tons, and the import dependence was about 57%.
With such a large proportion of imports, the impact of exchange rate fluctuations on the entire market is still very obvious, especially after ethylene glycol has fallen to a new low since 2016, the profit level of ethylene glycol factories has increased sharply. After being compressed, the impact of exchange rates is more obvious. However, the performance of ethylene glycol was still sluggish in May, with the RMB price falling 7% from the end of last month. Coupled with the impact of exchange rate fluctuations, the cost of imported ethylene glycol is facing unprecedented pressure.
7. The load of coal-based plants rebounded slightly
4. Domestic ethylene glycol plants began intensive maintenance in May. The operating rate dropped to around 65%, with the operating load of the coal-to-ethylene glycol plant falling back to below about 50%. At the end of May, companies that had carried out planned maintenance in the early stage were also preparing to restart their installations. Affected by the poor domestic market conditions, the restart process of maintenance equipment has been slow. For example, the maintenance of the Puyang unit has been postponed from the beginning of April to the end of May. The restart and discharging time of Yigao Chemical, Yangmei Shouyang, Hubei Fertilizer and other units have been delayed, and the overall load in May is still low.
In June, Lihua Yilijin’s 200,000 tons/year coal-to-ethylene glycol unit has resumed operations, and Xinjiang Tianye, Xinhang Energy, Yangmei Shenzhou, China Salt Red Sifang and other units have restarted one after another. . Although some factories are operating with reduced load, such as Henan Puyang Anyang, Hualu Hengsheng, etc., statistics show that since late June, the overall load of coal-to-ethylene glycol plants has reached 60%.
In July, according to the current maintenance plan, although there are a small number of domestic coal-based and petroleum-based ethylene glycol plants with maintenance plans, most factory equipment has gradually returned to normal, and output is expected to increase by 200,000 tons, the supply pressure on the market will increase again.
8. Saudi oil fields were attacked by ethylene glycol take-off
After the Mid-Autumn Festival, Saudi Arabia’s largest crude oil facility was attacked by drones The attack caused the suspension of more than 5 million barrels per day of production capacity. Since the affected oil production accounted for half of Saudi Arabia’s current oil production, Saudi Arabia’s oil output and exports were interrupted. As a result, WTI crude oil futures opened sharply and rose by more than 15%. , Brent crude oil futures rose by more than 19%.
Affected by this news, chemical commodity futures jumped short and opened higher, but the trend of ethylene glycol was particularly eye-catching. The main contract 2001 opened close to the limit price. After a brief dip, it resumed its upward trend. At present, At the daily limit. Related chemical products all showed a trend of opening higher and moving lower, and their performance was significantly weaker than that of ethylene glycol. </p
