On July 7th, the supply side of the East China market remained tight, with the diethylene glycol market remaining stagnant and consolidating. The atmosphere of actual orders was light, with sporadic quotes in the spot market. Domestic sources imported at a discount, while southern sources imported at a discount. The discount for East China increased, and the forward price increased by the end of July. There were almost no transactions in the forward price of August. The mainstream spot price in East China closed at 8200 yuan/ton and -50 yuan/ton; With the expectation of local equipment repair in the South China market, prices led the decline to close at 7300 yuan/ton and -150 yuan/ton; CFR China closed at $928/ton and $-20/ton.
Fundamental analysis:
Supply: In the short term, the domestic equipment for the supply of diethylene glycol is operating at low load. Recently, Shenghong has maintenance plans, and the domestic production in East China has decreased. There are expectations for Shell and Gulei equipment to be put into operation in South China, and there is a shortage of imported goods in the short term. Therefore, it is necessary to support the main port inventory in East China to drop to a historical low. As of July 6th, the inventory of ethylene glycol at ports in East China was 6800 tons, a decrease of 0.06 million tons from the previous statistical period. This week (July 7-13), there are no plans for Zhangjiagang Diethylene Glycol to arrive at the port. The overall performance of downstream is poor, with multidimensional holding on to low demand procurement and shipment, and expectations of continued destocking in the main ports of East China.
Demand: The downstream polyester load has been increased to 82%, and the overall unsaturated resin is stable. There is a significant discount from the southern region to the eastern region, and some of the goods will be sent to the southern region for replenishment. Some shipments in the Strait of Hormuz may pass through or suppress confidence in the future market. According to statistics, as of July 2nd, the average operating rate of unsaturated resin factories in China was 33%, which was the same as the previous period. Manufacturers purchase raw materials on demand. According to statistics, from July 3rd to July 5th, a total of 679 tons were shipped from the two storage areas in Zhangjiagang, with an average daily shipment of about 226 tons. On July 6th, the total shipment volume from the two storage areas in Zhangjiagang was 267 tons, an increase of 40 tons compared to the previous day, and the performance of port pickup further contracted.
Market expectation: In terms of imports, the internal ships of the Persian Gulf have successfully passed through the strait, and the arrival volume of foreign ships will increase from mid to late July. In terms of domestic production, there is still significant uncertainty regarding the restart/load increase of facilities such as Gulei Petrochemical, Hainan Refining and Chemical, and Sanjiang. Shenghong Petrochemical and Hengli Refining will gradually implement maintenance, and domestic supply will be compressed to a low level within the year. In terms of downstream demand, the monthly average load of polyester in July was further reduced to 82%, and the UPR operating load decreased synchronously, resulting in weakened demand support. The current supply situation continues to deviate from expectations, and prices vary greatly in different regions. However, the market’s bearish attitude towards prices is still very unified, and it is necessary to pay attention to the realization of supply and demand, and be cautious of being overly bearish on prices.
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