Inventory accumulation cycle emerges; long-term outlook for diethylene glycol remains weak

Introduction: As October begins, replenishment of import gaps from the Middle East is starting to concentrate. Combined with vessel cargoes from Taiwan (China), Canada, and Japan, inventory levels at major Chinese ports for diethylene glycol (DEG) are poised to enter a phase of rapid accumulation. Additionally, domestic supply this month remains abundant. Although downstream demand is rising concurrently, the overall trend indicates that the increase in supply will outpace the increase in demand.

Table 1: Estimated Vessel Arrivals at Major East China Ports in October (Unit: Tons)

On the domestic front, production volumes increased significantly in September. The restart of units, coupled with profit-driven increases in operating rates by producers, resulted in a domestic output of 95,100 tons in September, reaching a relatively sufficient level where domestic supply essentially covers rigid demand. In October, key domestic facilities are expected to maintain high load operations. Core large-scale petrochemical complexes in East China, including Zhejiang Petrochemical, Shenghong, Satellite Chemical, Zhenhai Refining & Chemical, and Sanjiang Chemical, are providing stable supply, with only Ningbo Fude undergoing scheduled shutdown maintenance. In South China, Zhongke Refining & Chemical and Fujian Gulei are operating at full capacity, while BASF is running at over 70% utilization. With stable and sufficient shipments from both northern and southern facilities, flexible allocation within the region is possible.

Table 2: Operating Rate Statistics for Ethylene Glycol/Diethylene Glycol Units in China (Unit: %)

(Note: Table data missing in source text)

A new window for capacity expansion opens in the fourth quarter. Two new units totaling 150,000 tons/year—Zhongsha Gulei and Huajin-Aramco—are planned to come online sequentially. Furthermore, there are expectations for the restart of Shenghong Refining & Chemical and Hainan Refining & Chemical, ensuring that incremental domestic supply will continue to be released. Looking at the longer term, the pricing logic for DEG’s future supply will shift from "tightness" to "surplus," deepening the market structure characterized by strength in near-month contracts and weakness in far-month contracts.

Currently, DEG prices have entered a relatively rational range. At current price levels, cost pressure on downstream sectors has eased significantly; however, the market awaits the resumption of procurement cycles across various downstream industries. As earlier orders for raw material substitution conclude and combined with low raw material inventories, incremental downstream demand is expected to become increasingly evident starting mid-month. Amid simultaneous increases in supply and demand, the market is entering a rebalancing adjustment cycle.