In The Short Term, Ethylene Glycol Or Lack Of Room For Improvement.

Over the past few months, overnight oil prices rose again slightly.

This week East China MEG to Hong Kong stock more, the current polyester centralized maintenance, with the approaching of the year, the middle of this month, the terminal weaving enterprise load will decline sharply, polyester market is facing the pressure of storehouse.

Ethylene glycol production capacity in the future is expected to increase production is larger, supply and demand side view glycol long-term fundamentals are empty, short term downstream stock market stimulate MEG rise, but space or relatively limited.

Improvement of macro environment

Recently, Xu Hongcai, Assistant Minister of finance, said that efforts should be made to reduce taxes and reduce fees and increase spending.

After the news came out, China's stock market and commodity futures were strong, and there was a rebound trend. Overnight crude oil also ended in a continuous decline, with a rise of nearly 3%.

Glycol also ended the situation of continuous adjustment, started from the bottom of the volume, has the effect of breaking away from the bottom, especially the big business main contract 1906 contract, relatively strong performance, from the previous discount of the spot in the near future, has become a certain premium to the spot.

On the one hand, China's implementation of the tax reduction measures is of great benefit to the macro environment. The trend of the early weakening of ethylene glycol is very large. The market participants are looking at the decline of the 2019 overall economy. On the other hand, the downstream demand of ethylene glycol mainly comes from the polyester plant, and the terminal demand of polyester factories mostly come from the manufacturing industry and small and micro enterprises. This is the key objective of reducing the tax burden. After the burden of the enterprise is reduced, the demand for polyester has increased significantly, which will also offset some of the worries caused by the increase in ethylene glycol production capacity.

Short term demand is hot.

With the rebound in crude oil prices, polyester production and sales were hot, inventory fell rapidly last week, especially POY inventory dropped from 14.5 days to 5.5 days.

Under the current inventory level, the pressure of polyester enterprises has been greatly reduced.

The Spring Festival holiday of weaving enterprises is coming soon. The textile industry is off season, and the terminal received more goods last week. If the crude oil price does not appear to continue to rise in the future, production and sales will soon drop.

Port inventory growth

Ethylene glycol rose sharply last week, returning to its highest level in the second half of 2018.

China has more new capacity this year and is well supplied.

Short term demand still has weakened expectations, so the fundamentals are short in the near future.

However, the cost price of coal to glycol is close to 5000 yuan / ton, so there is some support.

If crude oil prices no longer fluctuate significantly this week, ethylene glycol will remain at a low level.

Before the festival, there was a lack of substantial positive impetus, while the lower down kinetic energy was also limited.

Increase of maintenance enterprises

Although the recent market decline and environmental impact on the domestic coal glycol operation rate slightly decreased, but the domestic comprehensive operating rate remained above 70%, coupled with the continuous accumulation of inventory in eastern China port inventory, port inventory is relatively high in the year, and the follow-up is still rising expectations, the domestic supply side performance is adequate, and downstream factories since December announced parking review plan, now has entered the parking concentration period.

As the Spring Festival draws near, the overhaul enterprises will still increase. The enterprises that have passed the maintenance plan have accumulated to more than 8 million tons, and have reached the 3 million tons near the overhaul stage.

To sum up, under the promotion of the external atmosphere alleviation and the improvement of the domestic macro environment, ethylene glycol has a short-term or rising opportunity. However, in the weak fundamentals, it is expected that there will be greater resistance at the top of the market, and the overall lifting of space or limited continuation of the low central operation should be cautious.