Lead: In late August to early September, diethylene glycol ended its short squeeze and the market pulled back noticeably. Tensions in the US-Iran situation tightened once again, pushing international oil prices higher and lending support to the broader commodity market. However, DEG has been moving on its own track. With essentially no tradable imported cargo available at present, transactions have been concentrated around refinery supplies from Zhejiang Petrochemical, Shenghong, Sanjiang, and other producers.
DEG's entry into a downward channel is attributed to multiple factors: the short squeeze has ended and short positions are largely settled; the sharp price surge has made it difficult for downstream buyers to absorb costs, leading to reduced purchasing; restart of major refining/chemical complexes has weighed on prices; with imported spot cargo essentially absent, domestic spot supply has dominated trading.
Supply side: Sinopec Sheng Hong Petrochemical's No. 2 unit (900,000 t/y ethylene glycol/DEG) restarted successfully in late August and has since ramped up to 90% operating load. Plants in East China, including Zhenhai Refining & Chemical, Zhejiang Petrochemical, Far Eastern Union, and Sanjiang Chemical, have all raised operating rates, adding incremental domestic supply. On the import front, no substantive lifting of the strait passage restrictions has occurred given the Middle East situation, so long-haul import sources cannot be replenished in the short term. Additionally, a Taiwanese plant is slated to restart and resume supply in September.
Demand side: News of polyester output cuts has emerged, with the combined polyester operating load dropping to around 75% in September and an estimated monthly average load near 77%. UPR operating rates stand at roughly 30% overall; attention should be paid to downstream restocking follow-through. For downstream users, the rapid surge in feedstock prices has significantly raised production costs, and the various downstream sectors are finding it difficult to pass price increases down the chain quickly. End-user margins are being squeezed passively, creating underlying concerns about demand suppression.
Structural perspective: Domestic supply can cover rigid demand within the month. With lingering instability in the Middle East and continued absence of imports, DEG does not yet have the conditions for a broad price decline, and mainstream sentiment remains cautious about a break below the 10,000 yuan mark. Demand perspective: Downstream plants have shown only moderate purchasing interest recently. Despite the price retreat, procurement remains largely need-based, while limited spot circulation is constraining transaction volumes. Recent price action reflects market sentiment, with participants inclined to accept short-term declines while retaining expectations of a rebound in the medium term.
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