[Introduction] The U.S.-Iran conflict in the first half of the year had a significant impact on global commodity markets. China's diethylene glycol (DEG) has a high import dependence, with a major reliance on resources from the Middle East. Therefore, this conflict severely affected China's DEG supply, with main port inventories hitting record lows. As tensions in the Middle East ease and previously shuttered units restart, domestic supply is gradually recovering. The supply-demand structure for DEG in the second half of the year is expected to improve, and market prices will gradually return to rationality.
Part 1: Review and Analysis of the Diethylene Glycol Industry
1. Market Trends—Geopolitical Conflict Ignites Market; DEG Maintains Strength After a Sharp Rise in H1
In the first half of 2026, the domestic DEG market surged before maintaining strong volatility. The average price in East China during H1 was 5,631 yuan/ton, up 21.81% year-on-year. In South China, the average price was 5,746 yuan/ton, an increase of 20.85% compared with the same period last year. Following the U.S.-Iran conflict, the Strait of Hormuz was blockaded. Amid fears of supply disruptions, the market chased prices aggressively, rapidly pushing up the price center. After the easing of geopolitical tensions and the need to digest the sharp rally, the market entered an adjustment phase in mid-to-late April. However, the tight supply situation persisted, with inventories at the main East China port hitting new lows. Spot prices were driven up again, and by the end of June, East China spot prices once again broke through 8,000 yuan/ton.
Comparison of DEG Prices in H1 2026 vs. H1 2025
| Region | Unit | H1 2025 | H1 2026 | Change | YoY Change |
|---|---|---|---|---|---|
| South China | yuan/ton | 4,755 | 5,746 | 991 | 20.85% |
| East China | yuan/ton | 4,623 | 5,631 | 1,008 | 21.81% |
2. Domestic Supply—Slight Capacity Expansion; Utilization Rate Continues to Decline
According to data from Chempricehub, in the first half of 2026, BASF Zhanjiang's 800,000-ton/year ethylene glycol unit came on stream. Combined with the 900,000-ton/year Yulong Petrochemical unit that started up in October 2025, the industry added 1.7 million tons of capacity compared to H1 2025—the largest commissioning cycle since 2024.
New DEG Unit Startups in H1 2026
Unit: 10,000 tons/year
| Company | New Capacity | Start-up Time | Location |
|---|---|---|---|
| BASF Zhanjiang | 80 | January 2026 | Zhanjiang City |
The startup of new domestic capacity helps alleviate the high import dependency. However, since the U.S.-Iran conflict, prices have risen rapidly due to concerns about supply disruption risks. Price pass-through has been less than ideal, and demand-side support is insufficient. Under these multiple factors, overall domestic capacity utilization has declined, with some enterprises increasing maintenance activities. Notably, Zhejiang Petrochemical, Ningbo Fude, Hainan Refining & Chemical, Gulei Petrochemical, Shenghong Refining & Chemical, Satellite Chemical, and Yangzi Petrochemical all conducted turnarounds. In H1 2026, the average capacity utilization rate for domestic DEG units was only 53.68%, down 8.98 percentage points from last year.
3. Imports and Exports—Imports Down, Exports Up
From January to May 2026, cumulative imports reached 144,800 tons, a decrease of 55,700 tons or 27.78% year-on-year. China's main source of DEG imports is Saudi Arabia in the Middle East, which accounts for over 80% of the total. The U.S.-Iran conflict had a major impact on DEG imports; imports were normal in January-March but slumped sharply after the conflict erupted. In April, imports were only 5,800 tons.
From January to May 2026, cumulative exports were 39,300 tons, an increase of 14,300 tons or 57.2% year-on-year. Due to the global reallocation of resources triggered by the geopolitical conflict, and relatively lower domestic DEG prices, some companies in Japan, South Korea, and Southeast Asian countries chose to source from China. This market-driven adjustment led to a notable increase in product exports.
4. Consumer Market—Buyers Cautious; Overall Demand Side Underperforms
In 2026, high feedstock prices kept downstream orders lukewarm, and price pass-through was not smooth. Capacity utilization rates in the two major downstream sectors—polyester and unsaturated polyester resins—declined significantly. Polyester capacity utilization fell to 81.34%, down 7.45 percentage points from the same period last year.
5. Inventory—Main Port Inventories Hit Record Lows
The Middle East is China's primary source of DEG imports. Since the outbreak of the Middle East conflict, imports from the region have declined markedly. Inventories in East China fell from 52,100 tons at the end of February to 7,400 tons at the end of June, a decline of 85.8%.
Part 2: Analysis and Forecast for the Second Half of the Year
1. Many Turnarounds; Limited Domestic Incremental Supply
DEG Turnaround Schedule for H2 2026
Unit: 10,000 tons/year
| Producer | Capacity | Start Date | End Date | Reason |
|---|---|---|---|---|
| Sinopec Shanghai 1# | 2.3 | Switch to EO | / | Economic |
| Sanjiang Chemical 1# | 3.8 | May 27, 2025 | TBD | Economic |
| Shenghong Refining & Chemical 1# | 8 | Dec 4, 2025 | End of Q2 2026 | Planned |
| Satellite Chemical | 7.5 | Feb 11, 2026 | TBD | Product switch |
| Fujian Gulei | 6 | Mar 6, 2026 | Mid-July | Planned |
| Zhejiang Petrochemical | 6.5 | Apr 21, 2026 | TBD | Economic |
| Far Eastern Union (Yangzhou) | 4.5 | May 20, 2026 | TBD | Economic |
| Yangzi Petrochemical | 3 | May 15, 2026 | TBD | Planned |
| Hainan Refining & Chemical | 6.5 | Jun 5, 2026 | November | Planned |
| Shenghong Refining & Chemical | 7.5 | Jul 1, 2026 | Aug 31 | Planned |
| Total | 55.6 | -- | -- | -- |
From the turnaround schedule for H2 2026, it can be seen that one new 75,000-ton unit at Shenghong Refining & Chemical will undergo a turnaround, while the 60,000-ton unit at Gulei will restart on July 15. Overall, the number of units under maintenance is decreasing, but the incremental supply remains limited.
2. Peak Season Expectations Remain for H2; Demand May Recover Slightly
Forecast of Apparent DEG Consumption in H2 2026
Unit: 10,000 tons, %
| Item | H2 2026 (E) | H1 2026 | H2 2025 | MoM % | YoY % |
|---|---|---|---|---|---|
| Apparent Consumption (E) | 65.1 | 59.85 | 83.87 | 8.77% | -22.38% |
Based on the current situation, both the supply and demand sides are expected to improve, but given that supply and demand are at low levels, no explosive growth conditions in the external environment, and an overall unfavorable economic backdrop, apparent consumption is expected to increase in H2, but the upside is limited.
3. Supply Recovery; Market May Return to Rationality
In the second half of the year, DEG will return to being driven by fundamental logic, with other factors having limited impact. In July-August, domestic output will recover slightly, but overall will remain limited. The import situation may ease and requires further attention. Downstream unsaturated polyester resin and polyester producers remain resistant to high prices. Coupled with the upcoming supply recovery, market sentiment is bearish. However, tight spot supply may provide some support. According to conventional logic, late September to November is the traditional peak-demand season, but with incremental supply recovery, the market still faces certain pressure. It is expected that the spot market for mainstream DEG in H2 will fluctuate in the range of 6,000-8,500 yuan/ton.
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