Zhongjin research report shows that the new increase in ethylene glycol capacity will be limited in the second half of the year; on the demand side, the polyester industry is planning to add more than 8 million tons of new capacity by 2024, and the demand for filament in the second half of the year is stronger than that in the first half of the year. Considering that ethylene glycol inventory is relatively low, it is expected that ethylene glycol 2H24 will continue to recover moderately. It is recommended to pay attention to leading enterprises in ethylene glycol such as Rongsheng PetroChemical (002493.SZ) and Jiangsu Eastern Shenghong (000301.SZ).

CICC's main points are as follows:

The industry is in a period of rapid expansion from 2020 to 2023, and the operating rate of the industry has decreased.

Since 2020, the total domestic production capacity of ethylene glycol has maintained a high-speed growth, and the production capacity growth rates from 2020 to 2023 were 45.9%, 27.8%, 24.5%, and 15.2%, respectively, The production capacity growth rate is significantly faster than the apparent demand growth rate. On the other hand, With the release of domestic production capacity, China's ethylene glycol imports have decreased from 10.55 million tons in 2020 to 7.15 million tons in 2023, indicating a significant decrease in import dependence.

Since 2024, the price of ethylene glycol has followed an 'N' shape trend, with the price center moving up year on year.

Since 2024, the price of ethylene glycol has followed an 'N' shape trend, with an average price of 4,112 yuan/ton. Especially in the past two months, the price has continued to rebound, with an increase of more than 7%. Zhongjin thinks that the price rebound is mainly due to the phased slowdown of ethylene glycol production in 2024, and continued improvement in polyester demand. The loss narrows, and the coal-to-head route becomes profitable. Due to the rapid expansion of industry capacity after 2020, the supply-demand pattern has deteriorated rapidly, and ethylene glycol was in an overall loss status from the second half of 2021 to 2023. From the perspective of process routes, the synthetic gas method will end its losses and switch to a slightly profitable state after 2024. On the other hand, the ethylene method technology is still under pressure.

Long-term supply-side pressure still exists, but there is less pressure in 2024.

After high growth in supply from 2020 to 2023, the new capacity addition of ethylene glycol will slow down in 2024. Zhongjin predicts that the total new capacity addition for the year will be greatly reduced to 0.7 million tons, mainly from the Sinochem and Zhongda Kai projects. However, with the start-up of new projects such as Yulong Petrochemical, Huajin AMI, and Zhanjiang BASF in 2025, we expect the new capacity addition to reach 4.58 million tons, with a growth rate of 16%. The industry may still be in a period of rapid expansion in 2026, and we forecast a new capacity addition of 3.9 million tons.

Polyester production and sales are booming, with strong demand support for ethylene glycol in 2024.

The polyester industry has emerged from a trough in 2023, with the annual output of polyester filament reaching 41.52 million tons, a year-on-year increase of 13%. In 2024, the polyester industry will continue to strengthen, with production from January to May increasing by 21% year-on-year to 29.98 million tons. Looking ahead to the second half of the year, the demand in the high season is likely to be stronger than that in the first half of the year, and with the supply side becoming stronger, although the inventory level of the industry is slightly high, it may continue to weakly recover.

Risk factors: The price increase of crude oil, coal, and other commodities leads to an increase in costs, and polyester demand is lower than expected.