Ethylene: poor demand running under pressure

Recently, the ethylene market began to fluctuate upwards after reaching a phased bottom of 6,000 yuan (ton price, the same below) in June, and the price rose by about 400 yuan. Looking at the market outlook, the short-term supply of ethylene is still expected to grow, and the positive effects of the downstream are limited, and the market continues to face obstacles.

Supply increase expected

In July, driven by good news such as the continued outsourcing of Shandong Luqing Plant and the start-up of Yuhuang Styrene Plant, the domestic ethylene market demand has increased significantly. Downstream users actively entered the market, and manufacturers shipped smoothly, bringing upward momentum to the ethylene market.

Longzhong Information analyst Cui Xiaofei said that after the middle and late July, Xinpu Chemical's ethylene plant restarted, a large number of products were exported, and the downstream raw material inventory was high. Market gains slowed.

Looking at the market outlook, after the restart of Xinpu Chemical's supporting downstream equipment, the main delivery contracts will be the main ones in August, which will have no obvious impact on the ethylene spot market. In addition, there is an overhaul plan for Baolai Petrochemical's ethylene plant, but CNOOC Shell's cracker, Daqing Petrochemical and Lanzhou Petrochemical are expected to restart, and the impact of the increase in supply on the ethylene spot market is relatively limited. The export of Shenghong Refining's ethylene products may become a key factor affecting the domestic price in August. If its products are exported, the ethylene market will have the risk of falling.

From the perspective of import and export data, in the first half of the year, my country imported about 1.07 million tons of ethylene, an increase of 15.53% over the same period last year; the cumulative export of ethylene was about 123,300 tons, an increase of about 2.59% over last year. It can be seen from this that, compared with imported ethylene, both the quantity and the growth rate of export ethylene are much lower.

Looking at the external market, sellers tend to avoid fixed-price offers to control risks as industry players gradually become more worried about the market outlook. Although the downstream polyethylene (PE), styrene (SM), and ethylene glycol (EG) markets have risen, the overall trend is still volatile, which has not boosted the purchasing confidence of factories, and most buyers have completed stocking in August, and No rush to buy September ethylene.

Recently, sea freight prices have weakened, and the arbitrage window from the United States to Northeast Asia has opened again. It is expected that negotiations on ethylene cargoes from the United States will gradually increase in the later period, which will also put pressure on the domestic ethylene market.

Cost is upside down

Jinlianchuang analyst Yang Yang said that the ethylene raw material naphtha market first fell and then rose in July, and then rose rapidly after the middle of the month.

In early July, the consumption tax on gasoline components was imposed, and the market was relatively chaotic. But then the summer travel peak and the continuous rise of crude oil drove market sentiment, the refined oil market performed positively, and the terminal refinery reforming gap continued to be replenished, and the naphtha market took advantage of the opportunity to actively push up and out of the rapid rise. At the end of July, the profit of the market restructuring direction dropped significantly compared with the previous period, and the demand for ethylene cracking continued to weaken, and the market trading sentiment cooled down, showing a callback trend.

According to statistics, as of the end of July, the loss of naphtha to ethylene was US$160. Rising raw materials drive the ethylene market to go up, so the profit margin of ethylene remains large and stable.

Looking at the market outlook, the international crude oil price, as a guiding indicator of chemical products, has remained relatively strong in the near future, and the posture of continuous pressure after mid-March has finally changed. The rise in international oil prices was mainly due to the easing of interest rate hike pressure and the improvement of some US economic data. Against the background of the overall weakening of economic pressure, the long-standing positive fundamentals have been highlighted, and international crude oil has entered a long-lost high price range.

Looking at the market outlook, if Saudi Arabia's additional crude oil production cut of 1 million barrels per day is extended to September, and Russia will also implement an additional production cut of 500,000 barrels per day from August, it will continue to support oil prices at that time, which will drive oil prices. Naphtha market. If the transmission of ethylene costs is not smooth, naphtha-based ethylene will continue to maintain a loss-making state.

Limited positive demand

From the perspective of the terminal of the ethylene industry chain, the demand from the downstream of the four main forces is generally not strong. The overall operating rate of polyethylene downstream products and agricultural film is basically the same as that of the previous period; ethylene glycol is in a state of slight decline; the demand for the three major downstream sectors of styrene has declined; the operating conditions of polyvinyl chloride (PVC) product enterprises have not changed much, but exports have decreased.

Recently, the prices of many downstream products of domestic ethylene have passively followed up, but most of the industry profits are still in a state of loss, which affects the enthusiasm of enterprises to start operations.

The sales staff of Jilin Petrochemical said that in the future market, multiple sets of integrated ethylene plants will be restarted in a centralized manner, and the supporting ethylene cracking will start up simultaneously, and the demand side will steadily increase.

In addition, the polyethylene plants of Daqing Petrochemical and Lanzhou Petrochemical are about to restart, and a set of ethylene glycol plants of Satellite Chemical will be shut down; in terms of styrene, it is expected that Dagu 500,000 tons/year, Lishide 210,000 tons/year, Daqing 12 tons 10,000 tons/year, Huaxing 80,000 tons/year, and Lanzhou Huifeng, Lanzhou Petrochemical and other plants have entered into restart and recovery; Cangzhou Julong PVC plant has been shut down for maintenance. Overall, the demand in the domestic ethylene market has steadily increased, but all are based on integrated supporting facilities, and the demand in the spot market has not changed significantly.

Industry insiders are cautiously optimistic about the outlook for ethylene. Although the cost aspect may have a driving effect on the ethylene market, but the demand side is in the off-season, it is difficult to increase the purchase of raw material ethylene, and the integrated operating rate increases, the competition in the downstream market of ethylene will intensify, and the ethylene spot market has insufficient momentum to rise, or it can only be static Wait for the arrival of "Golden September and Silver October". (Zhao Shuling)