Introduction: Expectations of easing geopolitical tensions in the Middle East have led to a retreat in international crude oil prices from highs, resulting in a downward shift in cost support for diethylene glycol (DEG). Domestic supply has decreased, with import arrivals continuing to decline due to force majeure factors, leading to a significant overall supply reduction and a steady drawdown in port inventories. During the Qingming holiday, downstream unsaturated resin and other enterprises halted operations. Post-holiday, operations are steadily recovering, but the scope for load increase is limited due to high raw material costs. Supported by elevated costs and persistent supply shortages, DEG is expected to maintain high-price operations.
International Oil Prices Fall, Cost Support Shifts Downward
Crude Oil: Although the US and Iran are set to hold ceasefire talks, there has been no substantial improvement in navigation through the Strait of Hormuz. Crude oil production in Persian Gulf coastal countries remains low, with the overall supply assessment indicating a decrease. On the demand side, refinery operating rates in major Asian consumer countries have fallen to low levels, indicating weakening actual crude oil demand, and the overall consumption assessment is also for a decrease. The supply-demand balance shows supply falling short of demand, maintaining a significant supply gap. Given the considerable uncertainty surrounding US-Iran negotiations and the difficulty in rapidly clearing the Strait of Hormuz, the pattern of tight supply is expected to persist in the short term. International oil prices may decline, but the幅度 will likely be limited.
Cost Pressure Limits Downstream Demand Recovery
During the week, production and capacity utilization rates for unsaturated resin declined. The domestic unsaturated resin capacity utilization rate stood at 34%. Facilities at companies such as Fangxin, Chenbao, Guder, Huizhou Xinshuangli, and Jinan Lvzhou underwent short-term maintenance during the Qingming holiday. Post-holiday, idled facilities are gradually restarting. Domestic unsaturated resin production is expected to see a slight recovery next week, increasing demand for raw materials. However, high raw material prices and cost pressures will constrain the potential for further load increases.
Within the polyester sector, some facilities reduced output or underwent maintenance (e.g., Hengli, Yizheng Chemical Fiber), leading to a slight dip in overall supply levels and a decrease in domestic polyester industry production. Due to cost pressures, the comprehensive polyester capacity utilization rate shows a gradual downward trend. Previously idled or reduced facilities have delayed restarts, and leading companies are taking the initiative in voluntary production cuts. Following the Qingming holiday, the comprehensive polyester capacity utilization rate fell to around 83%, a decline of over 10% compared to the same period last year.
Weighed down by demand and cost pressures, some downstream unsaturated resin and polyester plants are planning output reductions and maintenance. Domestic downstream industry demand has decreased significantly compared to the same period last year.
Force Majeure Factors Lead to Steady Decline in Port Inventories
As of April 6, DEG port inventories in East China stood at 34,400 tonnes, showing a steady decline. Details: Zhangjiagang Changjiang International - 22,000 tonnes; Vopak - 12,400 tonnes; Qianhong - 0 tonnes; No arrivals at Hongchuan, Taicang, Jiangyin, etc. Affected by force majeure factors this month, scheduled future vessel arrivals have continued to decrease. Average daily shipments are around 1,300 tonnes. With smooth shipments, inventory drawdown is expected to continue.
Conclusion
In summary, with expectations of easing Middle East tensions, international crude oil prices are anticipated to retreat from highs but remain at elevated levels. Although cost support has shifted downward, it remains relatively strong. From a supply-demand perspective, the tight raw material supply situation is unlikely to be resolved quickly, with both domestic supply and imports experiencing some degree of contraction. As the traditional peak season approaches, purchasing enthusiasm for raw materials from downstream unsaturated resin and polyester enterprises is expected to gradually increase, and operating loads will continue to rise. Looking ahead, supported by costs, reduced supply, and increased demand, the DEG market is expected to maintain a strong and volatile pattern in the short term. Spot prices in the East China market may operate within the high range of 7,700-8,000 RMB/tonne. (*Monitor international crude oil prices, port inventories, and end-user orders, as well as recent changes in the Middle East situation.)
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