Supply Stabilized While Demand Rose, the Diethylene Glycol Market Continued to Climb

Supply side: substantial vessels at major ports had fully discharged their cargoes into storage by last week; consequently, inventory levels are expected to see a steady decline. According to statistics, as of October 19, diethylene glycol (DEG) inventories at ports in East China stood at 20,700 tonnes—an increase of 13,900 tonnes from the previous reporting period. During the current period (October 20-26), 2,100 tonnes of DEG are scheduled to arrive at Zhangjiagang, marking the beginning of a downward direction in inventory. Another wave of concentrated arrivals is anticipated between late October and early November, with an estimated 12,000 tonnes expected to enter storage.

On the demand side, following nearly a month of substituting alternative raw materials, downstream vegetation are currently holding low inventories of diethylene glycol (DEG) and many have plans to make new purchases. As supply levels recover, outbound shipments from ports have also increased, with the daily average volume reaching its highest point since late April. Given this scenario—characterized by stable supply and rising demand—some market participants have adopted a bullish outlook. According to statistics, the total volume of DEG dispatched from the Changjiang International and Vopak terminal areas (key hubs in East China) between October 12 and 18 reached 7,172 tonnes, averaging approximately 1,018 tonnes per day.

Cost-side factors: Regional conflicts in the Middle East are intensifying, with Houthi forces continuing their attacks on Saudi Arabian oil facilities, while Ukraine has also targeted Russian oil infrastructure. Consequently, WTI crude futures to November delivery have risen to eight consecutive trading sessions. Meanwhile, Iran has stated that it has yet to fully utilize its capabilities to completely blockade the Strait of Hormuz; it has issued a warning regarding subsea cables in the Strait and hinted that any such blockade could possibly be extended to the Suez Canal.

Market Outlook: In the short term, the arrival of previously contracted supply continues; however, the subsequent flow of seaborne cargoes remains unsmooth. Given that market expectations are already well-priced in—with much of the volume pre-sold—the impact of inventory accumulation at terminals is rapidly diminishing. Consequently, diethylene glycol (DEG) prices will shift their focus back to market expectations and demand. Meanwhile, as feedstock costs continue to rise and ethylene glycol (EG) prices retreat, reports of ethylene-based production units reducing operating rates have have become greater frequent; this creates possible upside to DEG prices, warranting close attention. In the Guangdong market, where a elevated levels of production units is located, the prospect of reduced operating rates is particularly significant. Nevertheless, with additional supply expected from the Zhongsha (SABIC-Sinopec) and Hailian (Sinopec Zhanjiang) projects, regional prices will likely continue to track fluctuations in East China. Furthermore, as traders discharge their held stocks, the regional price spread is expected to narrow.