Introduction: As September reaches its midpoint, domestic diethylene glycol (DEG) prices have fallen from above 10,000 yuan per ton to around 8,000 yuan. Notably, the market recorded a decline of approximately 1,000 yuan within just three days. The primary driver behind this sharp downturn is the anticipated increase in October imports, which has been factored into current pricing. This expectation, combined with a looming supply-increase and demand-weakness dynamic, has accelerated the downward trend.
Despite prolonged tensions between the U.S. and Iran keeping international crude oil prices elevated and driving broader commodity markets higher, these factors have had little impact on DEG. Instead, prices plummeted rapidly during the week. The core reason for this divergence lies in the front-loading of expectations regarding increased supply at major ports. Import schedules for October shipments have begun to emerge, including substantial volumes from the Middle East. When combined with stable and ample domestic production, this projected supply surge has exerted significant bearish pressure, pushing DEG prices sharply lower.
In Q3, geopolitical issues led to a shortage of Middle Eastern import cargoes. Major port inventories were replenished by domestic supply, as well as imports from South Asia and North America. Quarterly inventory levels fluctuated within a narrow range of 3,000 to 7,000 tons, indicating extremely low stock levels. Recently, however, October arrivals from the Middle East have been confirmed. Adding these to ongoing supplies from South Asia, North America, and domestic producers, the expected total volume arriving in October will exceed 20,000 tons. Given that demand is not expected to rise commensurately, this supply surplus presents clear bearish implications. On the domestic front, large integrated refining complexes are operating at full capacity, with leading producers running at or above maximum load. There are virtually no scheduled maintenance shutdowns planned for September or October, while the new Sinopec-Gulei unit is expected to commence operations in October.
Turning to demand-side dynamics: The three key downstream sectors—unsaturated polyester resins, polyesters, and polyurethanes—are all facing challenges in passing through costs. Driven by high crude oil prices, the costs of their primary raw materials remain elevated. Previously, when DEG prices were exceptionally high, some unsaturated resin and polyurethane manufacturers substituted DEG with other glycols such as monoethylene glycol (MEG) and propylene glycol. Even though DEG prices are currently trending steadily downward, the relatively high cost of alternative raw materials and the ongoing execution of substitution orders mean that downstream demand for DEG is unlikely to see significant growth in September. Consequently, traders’ expectations for pre-holiday inventory buildup are weak.
The broad-based decline driven by anticipated supply increases has yet to conclude. Market consensus suggests that prices may break below the 8,000 yuan/ton threshold. However, there has been limited discussion among industry participants regarding where spot prices might stabilize after breaching this level. Most stakeholders prefer to adopt a wait-and-see approach, monitoring market developments before making further judgments.
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