Dalian Commodity Exchange announced on October 16 that the China Securities Regulatory Commission has approved the project application for ethylene glycol futures, which means that ethylene glycol futures is closer to its official listing. step. In order to facilitate investors to understand this product, we briefly review the basic situation of the ethylene glycol industry.
What is ethylene glycol used for?
As an important basic organic raw material in petrochemical industry, ethylene glycol is mainly used in the production of polyester fiber, unsaturated polyester resin, antifreeze, lubricant, plasticizer and Dynamite. In addition, it can also be used in industries such as coatings, photographic developers, brake fluids and inks. Globally, more than 90% of ethylene glycol is used to synthesize polyester products with PTA, and more than 74% of my country’s ethylene glycol is used to produce polyester fibers such as polyester.
Domestic ethylene glycol spot market supply and demand situation
my country is the world’s largest polyester producer and the largest consumer of ethylene glycol. The demand for ethylene glycol accounts for about 40% of the world’s total demand, and it is also dependent on foreign countries. The degree is as high as 70%. In 2015, my country’s ethylene glycol production was approximately 3.916 million tons, the import volume was approximately 8.772 million tons, and the apparent consumption was approximately 12.667 million tons. Calculated based on the price fluctuation range in 2015, the size of the spot market funds reached 100 billion yuan. Data show that from 2010 to 2015, the average annual price fluctuation of ethylene glycol reached 50%. In 2015, the highest price of ethylene glycol was 8,060 yuan/ton and the lowest price was 4,155 yuan/ton, with a fluctuation of 49%. During the same period, PTA price volatility was only 24%. Violent price fluctuations intensify the procurement risks of polyester companies. The listing of ethylene glycol futures can help companies cope with price fluctuations, so that since 2010, there have been growing calls for the listing of ethylene glycol futures.
At present, the domestic ethylene glycol production capacity is 8.8 million tons/year. The main production processes are ethylene method and coal production method, accounting for 60% and 40% of ethylene glycol production respectively. %. Benefiting from lower international oil prices, the ethylene process is the main force in domestic ethylene glycol production, and the main production companies are Sinopec and CNPC’s local branches. Among them, Sinopec accounts for 38% of total domestic production capacity. In recent years, with the decline in coal prices and the development of coal-to-ethylene glycol technology, coal-to-ethylene glycol production capacity has also been put into operation rapidly. According to statistics, the coal-to-ethylene glycol project put into operation in 2015 reached 1 million tons/year, and there are many subsequent projects planned.
However, although my country’s coal-to-ethylene glycol production capacity is growing rapidly and domestic production capacity is not low, the actual effective operating rate is not high, with the operating rate at 50% year-round. %—65%. Production capacity cannot be effectively released. The main reason is that international oil prices are low and coal prices are rising, resulting in the cost advantage of non-oil routes disappearing. Overall, the effective domestic production of ethylene glycol is not large, and 70% still needs to be imported.
Because of this, the sharp rise and fall in international oil prices has caused drastic fluctuations in ethylene glycol prices, which in turn has caused polyester companies to face greater operating risks.
The listing of ethylene glycol will help improve the polyester industry chain
At present, the global spot trade of ethylene glycol mainly uses the monthly average prices of ICIS and Platts as the main reference indicators. In domestic spot trade, Sinopec’s external listing price also mainly refers to quotations from ICIS and Platts, but it is difficult to accurately reflect the latest changes in my country’s ethylene glycol supply and demand in a timely manner. In addition, due to the small number of participants in domestic electronic trading, it is difficult to effectively guide prices, while paper trading is prone to default risks when facing extreme market conditions. Therefore, the listing of ethylene glycol futures will form a highly binding market.
Ethylene glycol futures trading has not yet been launched in the international market. With my country’s advantages in global ethylene glycol spot trade, domestic futures prices are expected to become the global ethylene glycol production, trade and An important price reference for consumer companies.
“Ethylene glycol futures can cooperate with existing petrochemical futures varieties to improve the polyester industry chain. Both polyester companies and ethylene glycol companies can further improve the hedging system. “Wang Shu, the person in charge of ethylene glycol at Zhejiang Qiancheng Petrochemical said.
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