Scarce of Arrivals at Ports, the Focus of the Diethylene Glycol Market Shifted Upward

Fundamentals:

Supply: Domestic installation, Hengli maintenance one set, Shenghong and Far Eastern Union are expected to restart around mid August; Imported from abroad, the strait remains closed, and there is currently no replenishment of Middle Eastern cargo. Ships arriving in mid August might be in neutral. As of August 3rd, the inventory of diethylene glycol ports in East China was 8460 tons, an increase of 0.085 million tons compared to the previous statistical cycle. This week (August 4-10), Zhangjiagang Diethylene Glycol plans to arrive at the port with a capacity of 3600 tons, including one domestically produced ship and no ocean going vessels. The shortage of ships from the main port to the terminal inventory continues to be low.

Demand: Raw materials continue to remain high, resin load slightly decreases, and polyester production is weakly stable. According to statistics, as of July 30th, the average weekly operating rate of unsaturated resin factories in China was 33%, a decrease of 1 percentage point from the previous period. In terms of dock shipments, from July 27th to August 2nd, the total amount of shipments from the main ports in East China, Changjiang International and Fubao Warehouse, was 2,438 tons, with an average daily shipment of about 348 tons. On August 3rd, a total of 246 tons were shipped from the two storage areas in Zhangjiagang, a decrease of 102 tons from the previous Sunday.

Cost aspect: Oil tanker activity at Yanbu Port in Saudi Arabia has surged, and the Red Sea oil corridor has resumed activity; OPEC+agrees to increase the oil production quota to September by 188000 barrels per day; The United States has cancelled its new strike plan against Iran and plans to start new negotiations as soon as possible. Market concerns about supply risks have significantly eased, and international oil prices have returned to their previous geopolitical premium.

Market outlook

Entering August, the strait remains closed and there is no replenishment of Middle Eastern cargo. In addition, with the addition of Hengli maintenance during the month, supply expectations continue to be tight. The price of diethylene glycol might further enhance with the duration of the strait closure. However, considering the rapidly changing situation in the Middle East, the premium risk of crude oil and diethylene glycol remains high. Continuing the previous view that "price and supply interruption risk are equally high", it is recommended to maintain cautious and low position operations; As the cost of upstream raw materials continues to rise in the southern market, the expected supply of regional facilities might decrease. In addition, there is currently no ship cargo connection at the subsequent terminals, and the overall supply expectation is limited. Prices have also have become firm with changes in supply and costs, and regional differences are gradually narrowing. However, the follow-up of terminal buying in the region is weak, and cross regional arbitrage space has also been closed. Price support is still relatively weak compared to East China.

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