Diethylene Glycol Market Retreated from Highs amid Weak Demand

Fundamental Analysis:

Supply: In the short term, domestic diethylene glycol (DEG) vegetation are operating at low utilization rates. Shenghong has scheduled maintenance, leading to reduced domestic output in East China, while vegetation operated by Shell and Gulei in South China are expected to come online. With limited near-term import arrivals, inventories at major East China ports have dropped to historical lows due to demand support. As of July 6, DEG port inventories in East China stood at 6,800 tonnes, a decrease of 600 tonnes from the previous reporting period. There are no scheduled arrivals at Zhangjiagang this week (July 7-13). Downstream performance remains generally lackluster, with purchasing largely limited to immediate needs and low shipment volumes; consequently, inventories at major East China ports are expected to continue declining.

Demand: Downstream polyester operating rates have risen to 82%, while the unsaturated resin market remains generally stable. Regionally, prices in the South are trading at a significant discount to East China, with some supply in South China being supplemented by deliveries from other regions; meanwhile, the transit of cargoes through the Strait of Hormuz has weighed on market confidence regarding the prolonged outlook. Statistics show that as of July 2, the average operating rate of domestic unsaturated resin vegetation stood at 33%, unchanged from the previous period. Manufacturers are purchasing raw materials on an as-needed basis; data indicates that total shipments from the two storage zones in Zhangjiagang amounted to 679 tonnes between July 3 and July 5, averaging approximately 226 tonnes per day. On July 6, total shipments from these zones reached 267 tonnes—an increase of 40 tonnes from the previous day—though terminal pickup activity showed further contraction.

Market Outlook:

Regarding imports, some vessels within the Persian Gulf have successfully transited the strait, and the volume of foreign vessel arrivals is expected to rise from mid-to-late July. On the domestic front, significant uncertainty remains regarding the restart or capacity ramp-up of units such as Gulei Petrochemical, Hainan Refining & Chemical, and Sanjiang. With maintenance scheduled to Shenghong Petrochemical and Hengli Refining & Chemical, domestic supply is set to contract to its lowest level of the year. In terms of downstream demand, the average monthly operating rate to polyester in July has been revised down to 82%, and operating rates to UPR have declined in tandem, weakening demand support. While current supply realities diverge from expectations and regional price trends vary, market sentiment remains bearish across the board; however, one should monitor actual supply and demand outcomes and exercise caution against being overly bearish on prices.