Review of MEG market operation in 2019
MEG price Trend
In the market price wide shocks mainly. The absolute price of ethylene glycol lower overall trend in line with the fundamental logic. In the first half of the year, the price center of gravity of ethylene glycol dropped, the obvious inventory high and far month production pressure is obvious. In the second half of the year, the reality of ethylene glycol tight and weak expectations game, the price center of gravity wide shock. In spite of the rebound in the commodity market and the temporary shutdown of the Taiwan plant, ethylene glycol rebounded weakly under the pressure of high inventory, and the follow-up strength of the spot market was limited.
In May, the glycol market was "V" - shaped trend, the overall trading floor is fair. In the first half of the month, due to the aggravation of trade frictions between China and the United States, the market sentiment turned bearish, and the spot fell to below RMB 4,200 / ton. In the second half of the year, the price of ethylene glycol low center of gravity stabilized slightly rebound, low price operation of ethylene glycol supply and demand pattern repair, some traders to fill the active spot market has been tightened. June - July, ethylene glycol market bottom finishing. In June, glycol price center of gravity firm up, active spot market transaction, futures spot price spreads significantly narrowed. In the process of inventory destocking, some polyester factories purchased spot goods at a low level, and the spot market traded at a high level to around 4500 yuan/ton. In July, the price of ethylene glycol price center of gravity shock rise, the market discussion is fair. Among them by the market individual main body agreement to close the impact of the spot market, the spot market to pick up gas, can be transferred to a tight spot. Spot prices firm up to 4680 yuan/ton near, but the market mentality is more cautious, meet the intention to increase significantly, the end of the market price moderate retreat. August - October, ethylene glycol price center of gravity fell back. In August, the price of ethylene glycol fluctuates upward, the goods delivered in the market is relatively small, and the strong typhoon has obvious influence on the closure of shipping. In the short term, the spot can be transferred within the market contraction, and the market mentality has been boosted. At the same time ethylene glycol destocking logic continued, the rapid decline of the port inventory, the floor to follow up the obvious, the spot price chasing up at 4650-4660 yuan/ton near. In September, when ethylene glycol prices spiked, oil and energy-related commodities jumped after an attack at a Saudi oil field during the Mid-Autumn festival holiday, resulting in a sharp drop in crude and associated gas production. Under the influence of the news, the market sentiment of ethylene glycol was fermented significantly. The term spot prices rose significantly, and the price characteristics of the spot high by negotiation had reached 5500 yuan/ton. Then the ethylene glycol fell back to adjust, the site profit on the stock action is obvious, in addition to the Saudi oil fields to the end of the month can resume the impact of the news, the market mentality back to rational. October glycol price center of gravity fell, the overall market shipping intention is concentrated. After the festival regression, glycol price weight. In November, the price of ethylene glycol shock firm, the basic reflection of the reality of tight logic. Early a week, the price of ethylene glycol shock downward, the market negotiation is general, the spot mainstream basis around the price of 45-55 yuan/ton, the floor to follow up carefully. Spot back to 4450 yuan/ton near the low buying gas concentration is obvious. In the middle of the day, the price of ethylene glycol increased significantly, the market price of ethylene glycol rose significantly, the exchange spot spot tightening, traders actively follow up, spot price high transaction to 4750 yuan/ton, delivery period glycol price center of gravity high firm, spot basis strengthened to 150 yuan/ton near. By the end of the month, due to the pollution of ethylene glycol cargo and the delay news, the inventory in the main port area of East China was again at a low level. The price center of gravity of ethylene glycol was mainly adjusted, and the 1-5 price difference widened to around 140-150 yuan/ton.
From January to November 2019, the average prices of CCF MEG were RMB 4,709.82 / ton and US $572.39 / ton, respectively, which decreased by RMB 2,665.81 / ton and US $348.31 / ton from the same period in 2018.
From January to November 2019, the average load of ethylene glycol units in China was 71.18%, among which the average load of ethylene glycol units from coal to coal was 65.32%. In the year, the operating load of ethylene glycol went down significantly in the second quarter. On the one hand, spring inspection was carried out on the ethylene glycol unit; on the other hand, when the absolute price of ethylene glycol went down, the switching of relevant products in the traditional unit was obvious, and the maintenance time of the coal unit was extended.
From January to November of 2019, the annual domestic production of ethylene glycol was about 6.947 million tons, an increase of 464,000 tons, an increase of 7.2%. The cumulative production of ethylene glycol from coal to coal in Qi was about 2.663 million tons, an increase of about 526 million tons, an increase of about 24.6%, compared with the same period of last year.
Abroad, the import of goods is still an important supply of the domestic market. MEG's price focus in China was low during the year, but its huge demand for polyester still led to a large quantity of goods being shipped to China. In addition, the foreign market ethylene glycol production capacity concentrated, North America and other places ethylene glycol overcapacity is obvious. Since the second half of the year, the price center of Chinese ethylene glycol is relatively on the high side of the global market.
It is estimated that by the end of December 2019 MEG social inventory will decline slightly compared with the end of 2018, with the overall range of 250,000 to 300,000 tons, among which MEG inventory in major ports in East China will decline simultaneously.
In 2019, the ethylene glycol supply and demand pattern showed a small destocking and entered the continuous destocking channel from May. In December, the supply and demand pattern showed a moderate inflection point, but the overall accumulative quantity was limited. From January to April, the accumulative inventory of ethylene glycol was obvious, the overall range was around 700,000-750,000 tons, and the explicit inventory went up simultaneously. In mid-April, the inventory of ethylene glycol in east China main port went up to more than 1.4 million tons. It is mainly affected by the rapid expansion of supply port and the limited growth rate of demand link. Since May, the absolute price of ethylene glycol has been at a low level, the reduction and shutdown of domestic and foreign installations has been frequent, and the supply end has been greatly contracted. Among them, the monthly contraction of syngas production link is around 100,000 tons, and ethylene glycol enters the destocking channel. From December, ethylene glycol will be moderately accumulated, mainly by the end of the polyester plant maintenance caused by the shrinkage in demand.
MEG market Outlook for 2020
By 2020, the total production capacity of ethylene glycol planned to be put into use at home and abroad will reach 8.768 million tons. Domestic production capacity is planned to increase by about 6.49 million tons (2.94 million tons are syngas production units, 3.55 million tons are integrated units), and foreign production capacity is planned to increase by about 2.278 million tons. According to the production process, the production capacity of synthetic gas production in 2019 is 2.94 million tons, accounting for about 33.5%. Ethylene production capacity is 5.828 million tons, accounting for about 66.5%.
On the supply side, domestic MEG supply will still maintain a high growth rate in 2020, and the supply growth rate is expected to be around 27%. From the perspective of domestic supply, domestic MEG output will continue to grow at a high speed in 2020, with the main growth coming from large-scale petrochemical integration projects, such as Hengli Petrochemical co., LTD., Zhejiang Petrochemical Co., LTD., Zhejiang Petrochemical Co., LTD., And ZHONGhua Quanzhou and Zhongke MEG installations. In addition, coal-to-ethylene glycol units will also provide part of the output, such as Yankuang in Inner Mongolia, Tianye in Xinjiang and other units. Production increases from new installations are expected to be around 2.7-2.9m tonnes. In addition, changes in output caused by plant overhaul are also of concern. In 2019, the price center of ethylene glycol in China fell sharply, and the reduction of production of domestic equipment was obvious, in which the production of syngas was reduced by 100,000 tons per month. With the concentrated release of absolute ethylene glycol production capacity in 2020, the reduction and shutdown of devices due to low price may be intensified. It is expected that production from the EO/EG switch will continue to shrink by 750,000 to 850,000 tons. Overall, the annual production of ethylene glycol in 2020 will be around 965-9.75 million tons.
From the perspective of import supply, the production and release of overseas installations will be concentrated in 2020, with a total of 2.28 million tons of installations to be put into operation. Of course, one of them JUPC3 device planned at the end of 2020 commissioning trial, the overall supply more difficult to reflect. But meglobal's 750,000 mMTpy installation, which will be launched in the fourth quarter of 2019, will largely be released as a new installation. It is estimated that MEG import volume will be around 10.5 million tons in 2020, and MEG external dependence will remain at a small drop. In addition, with the rapid expansion of domestic and foreign supply, the demand side prefers domestic supply when choosing sources of goods. In the future, the price difference between inside and outside us dollars may be linked together for a long time.
In terms of demand, the polyester unit to be put into operation in 2020 will be around 5.08 million tons, the polyester output growth is expected to be around 6%, and the demand increase on MEG will be around 1 million tons. The increase in MEG demand for polyester links is about 100,000 tons. If the polyester output grows by 6% year on year, the annual MEG supply will be oversupplied. If the traditional equipment goes into production smoothly, the MEG supply pressure may intensify in the second half of the year. In addition, the production process of polyester link will be paid attention to, and the supply and demand will improve under the pattern of scissors difference.
In the oil market, institutions are taking a relatively cautious view on oil demand in 2020 as economic indicators decline. In November, the OECD released its economic outlook, cutting its forecast for global economic growth by 0.1 percentage point to 2.9 percent in 2020. By region, the GROWTH rate of the US economy is expected to be 2.3% in 2019 and 2% in 2020. The euro zone is 1.2% in 2019 and 1.1% in 2020; In the UK, it was 1.2% in 2019 and 1.0% in 2020. The OECD warned that uncertainty would continue to grow and undermine prospects for growth, with the world economy growing at its slowest pace since the financial crisis this year, with no improvement next year and only a slight acceleration in 2021.
Until more evidence of demand improvement is seen, the probability of crude oil remaining in the range is relatively high. At present, the WTI price center is basically estimated to be around $55 / BBL, while Brent price center is around $65 / BBL. However, the influence of geographical factors and other factors should be considered in local time. Global inflation remains low, led by crude oil prices, and commodity trends remain cautious based on overall demand expectations.
From the perspective of price, during the continuous release of ethylene glycol production capacity in 2020, the supply shock brought by the commissioning of large refining and chemical projects will be significantly higher than that of coal making plants in previous years. Annual supply and demand pattern, ethylene glycol surplus is expected to be more obvious. Supply pressure, ethylene glycol price lower center of gravity will performance, cash flow will be compressed.