SunSirs: With Tight Spot Supply, Diethylene Glycol Continued Its Upward Trend

Price trends

On July 14, the East China market faced tight spot supplies as a typhoon disrupted short-sea shipping and the loading/unloading of domestically produced cargoes in Zhejiang; consequently, inventories at major East China ports hit a new historical low, and regional spot liquidity tightened. Sellers held the upper hand in pricing, driving a steady upward trend in market prices. Mainstream spot prices in East China closed at 9,330 RMB/ton (up 130 RMB/ton), marking a ten-year high. In contrast, the South China market saw the price discount widen to a record high of nearly 1,500 RMB/ton, driven by regional supply-demand dynamics and the restart of local production units; this created a significant spread for inter-regional arbitrage, with the market closing at 7,900 RMB/ton (down 100 RMB/ton). CFR China prices closed at 1,103 USD/tonne (down 23 USD/tonne).

Fundamental Analysis:

Regarding market constraints, the formic acid industry is currently in its traditional off-season; downstream end-user demand remains generally lackluster, and the pace of essential procurement has slowed. The market lacks the sustained demand growth needed to drive prices upward, a factor that is primarily keeping market trends range-bound. Overall, the tug-of-war between bullish and bearish forces is currently balanced: a healthy decline in inventory provides support, while weak off-season demand exerts downward pressure, resulting in a stable market landscape as these opposing factors offset one another.

Demand: Operating rates for downstream polyester and unsaturated resin remain generally stable overall; regionally, prices in the South are trading at a significant discount to East China, with some supplies delivered to South China to meet demand. Statistics show that as of July 9, the average operating rate of domestic unsaturated resin plants stood at 32%, down 1% 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 903 tonnes between July 10 and July 12, averaging approximately 301 tonnes per day. On July 13, total shipments from these zones were 232 tonnes, a decrease of 71 tonnes compared to the previous day.

Market Outlook:

Looking ahead, regarding imports, the loading and unloading of short-haul cargoes have been delayed by Typhoon Bavi; as July and August mark the peak season for typhoons, the pace of import recovery may be hindered, so changes in shipping schedules warrant close attention. On the domestic front, Shenghong Petrochemical and Hengli Refining are set to proceed with scheduled maintenance in July, while CNOOC-Shell and Gulei Petrochemical are restarting operations; demand remains generally stable. Prices for diethylene glycol (DEG) are expected to stay strong this week amid a short squeeze at major ports, though the expectation remains that prices will retreat from their highs as cargo supplies are gradually replenished. However, given the geopolitical tensions between the US and Iran, potential disruptions to the supply chain make it difficult to establish a firm price floor; consequently, the current outlook leans cautiously bearish, with a focus on the sustainability of the supply recovery.

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