At 11:10 on November 8, the polyester ethylene glycol product of Yulin Chemical Co., Ltd. of Shaanxi Coal Group officially launched! This is the first time that polyester grade ethylene glycol products produced by Yulin Chemical Co., Ltd., which meet the requirements of GB/T4649-2018, are transported to Zhejiang Hengyi Group Co., Ltd., a well-known polyester factory in China.
After the price continued to fall and hit a new low in the year, ethylene glycol futures entered the bottom consolidation stage. In recent days, compared with PTA and staple fiber in the same industry chain, the ethylene glycol price rebounded strongly, once leading the whole polyester sector. The weakest “it” in the polyester sector suddenly took off. Is it “salted fish”?
Recently, the price of ethylene glycol rebounded at a low level, leading the rise of most chemicals. In this regard, Shi Jiaping, a senior analyst of Huarui Information, explained that, on the one hand, the extrusion of the ethylene glycol supply side was more obvious. In November, the domestic ethylene glycol starting load had dropped to 55% – 56%, while the synthetic gas to ethylene glycol starting load had dropped to about 30% – 33%, basically a historical low. On the other hand, the price of ethylene glycol has fallen to a low level, which has deviated too much from the valuation. At present, the market sentiment has warmed up, and the products with excessive profit compression in the early stage need to be repaired.
Recently, the ethylene glycol futures reversed and rose, which was “unique” in the polyester sector. In fact, it was a kind of valuation repair after all bad bets were traded. In the long run, there are still many sets of devices expected to be put into production in the future. However, under such a pessimistic background, including the small stock removal at the port and the long-term boost of consumption from macro policies, they will provide an upward momentum for the over underestimated ethylene glycol. From the results, the recent rise of ethylene glycol is better than other polyester products.
1. The production capacity is further improved, and the development potential of coal to ethylene glycol is great.
According to the In depth Analysis of China’s Ethylene Glycol Industry Development and Future Investment Research Report (2022-2029) released by Guanyan Report Network, in recent years, the global ethylene glycol industry has developed rapidly, with ethylene glycol production capacity and output increasing year by year. In 2021, the global ethylene glycol production capacity will increase by 19.4% year on year, and the output will increase by 7.5% year on year. Under this background, the production capacity and output of China’s ethylene glycol industry are also increasing year by year.
In terms of production capacity, as the country pays more attention to the ethylene glycol industry, relevant guidance and supporting policies such as the Formula for Encouraging the Promotion and Application of Technologies and Products in Petrochemical and Chemical Industry in 2021, the Guiding Opinions on Promoting the High Quality Development of Petrochemical and Chemical Industry during the “Fourteenth Five Year Plan” and the Guiding Opinions on the High Quality Development of Chemical Fiber Industry in 2022 continue to be issued, and the industrial policy environment continues to be favorable, China’s ethylene glycol production capacity is increasing year by year. According to the data, China’s ethylene glycol production capacity will increase from 8.32 million tons to 21.45 million tons from 2017 to 2021, with an average annual compound growth rate of about 31%.
In terms of capacity utilization rate, the overall utilization rate of ethylene glycol capacity in China is low at present, which was about 68.63% in 2017; It will increase to 73.42% by 2019. However, from 2020 to 2021, due to the impact of epidemic isolation at home, ethylene glycol device maintenance, power rationing and high coal prices, the domestic ethylene glycol starting load is low, and the overall industry starts to decline significantly, resulting in the ethylene glycol capacity utilization rate in China dropping to 60.06% and 55.01% respectively in the past two years.
In terms of output, with the expansion of ethylene glycol market capacity and the overall increase of downstream demand, the output also shows a trend of annual growth. From 2017 to 2021, China’s ethylene glycol output increased from 5.71 million tons to 11.8 million tons, and its output growth rate also showed an upward trend in the past two years, driven by the substantial growth of its production capacity. In 2021, China’s ethylene glycol output growth rate was about 21.65% year-on-year, 2.63 percentage points higher than that in 2020.
From the change of China’s ethylene glycol production capacity, it can be seen that China’s ethylene glycol production capacity has been further improved in recent five years, and the industry is in the stage of growth and development.
In terms of industry process, there are three mainstream production processes of ethylene glycol in China: integration (naphtha/ethylene process), MTO (methanol to olefin) and coal to ethylene glycol. At present, due to the highly skilled technology of petroleum to ethylene glycol in China, which is the mainstream process route, the design capacity of petroleum to ethylene glycol accounts for the highest proportion. In 2021, the production capacity of petroleum to ethylene glycol in China will account for more than 60%, and the output will exceed 7 million tons; The second is coal to ethylene glycol technology (the coal route is to use coal synthesis gas first, and then use water and carbon monoxide in the synthesis gas as raw materials to prepare ethylene glycol), with the production capacity accounting for more than 30% and the output exceeding 3 million tons. The oil price has risen in recent two years, and the production of coal to ethylene glycol in China has grown rapidly. In 2021, the production of coal to ethylene glycol in China will grow by about 50% year on year. As China has an energy structure of “more coal, less gas and less oil”, coal to ethylene glycol is China’s characteristic in terms of the overall supply of ethylene glycol in China. In the future, China’s coal to ethylene glycol has great development potential.
2. Naphtha is weak and hard to improve
The loose supply and demand led to the poor performance of the ethylene glycol sector, and the production remained in the negative profit range. At the same time, the performance of its raw materials naphtha and ethylene is also sluggish, making the cost support of ethylene glycol weak.
In terms of the global market for ethylene glycol raw materials, naphtha integration accounts for the largest proportion, followed by natural gas and ethane production overseas, and coal production in China. Naphtha integration was once a production process with strong cost advantages, but this year, the strong oil price and weak consumption led to a comprehensive loss in the olefin industry chain, ethylene cracking units reduced production in a large area, and the naphtha crude oil price difference once entered a negative range, This means that the product price is lower than that of raw materials, and the production is in a loss. By the end of October, the price difference between naphtha and crude oil had been fluctuating around zero. The weakness of naphtha makes ethylene glycol lack of cost support. Therefore, in the process of oil price rising and falling, naphtha follows the oil price down, and ethylene glycol loses cost support. This is also an important factor for ethylene glycol price to continue to weaken since the second quarter of this year.
3. Strong coal price cannot support ethylene glycol
The coal production line is a unique ethylene glycol production process in China. At present, the domestic coal production capacity has reached 8.65 million tons, accounting for 37% of the total domestic capacity. The price trend of chemical coal is relatively strong, and it has been operating at more than 1100 yuan/ton for most of the year, and has reached more than 1300 yuan/ton since September. The loss of coal to ethylene glycol is theoretically more than 1000 yuan/ton. Because the sources of syngas used by each unit are different, the specific production profit can only be roughly judged. However, coal to ethylene glycol has been in a loss state since the second quarter of this year, and the loss continues to deepen with the strengthening of coal prices. However, some coal chemical plants use coke oven tail gas for production, which belongs to waste recycling and is not affected by the coal price; In addition, there are some supporting devices of coal enterprises. In the process of rising coal prices, the upstream coal profits are rich, so the tolerance of downstream ethylene glycol losses is improved. Therefore, we can see that although the profit of coal to ethylene glycol is poor this year, its unit is less affected by the profit fluctuation compared with previous years. The annual catalyst replacement and other maintenance needs of the unit were concentrated in the third quarter, which led to a rapid decline in the operating rate of coal to ethylene glycol. On the whole, except for the shutdown of several external raw material mining units due to profit problems in the year, the operation of coal based units is relatively stable this year, with limited support for ethylene glycol.
Looking ahead to the future, the weak supply and demand expectation will keep the price of ethylene glycol under pressure. 600000 tons of the 1.8 million ton units in Yulin, Shaanxi Coal Mine have been commissioned, and the remaining 1.2 million tons are planned to be put into production in the fourth quarter. In addition, the Jiutai 1 million ton unit ethylene glycol project has also been put into production. In the future, there is also the expectation that the Sanjiang 1 million ton MTO and the ethylene glycol unit supporting Shenghong Petrochemical will be put into production. From the fourth quarter to the first half of next year, the new supply pressure oethylene glycol is still large. Weak terminal consumption continues to drag down the olefin market. The low price of naphtha makes ethylene glycol lack of cost support, and strong domestic coal prices are also difficult to have a significant impact on ethylene glycol. The expectation of weak cost and supply and demand will keep the price of ethylene glycol low.
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Post time: Dec-16-2022