According to the Zhitong Finance APP, Shenwan Hongyuan released a research report stating that from 2023 to 2024, with the capacity expansion of downstream polyester filament, bottle chips, and other products, the demand for ethylene glycol will grow significantly, driving a recovery in prosperity. It is expected that under the tightening supply and demand, there is room for the price center of ethylene glycol to continue to rise. On the supply side, due to weakened profitability of ethylene glycol, the industry's supply growth rate has slowed in the past two years. It is expected that by 2025-2026, new domestic capacity will reach 2.8 million tons, with capacity growth being less than that of downstream, hence it is anticipated that the supply and demand for ethylene glycol will continue to tighten in the future. Regarding the operating rate, the current profitability at the coal end has turned positive, and with the decline in coal prices, there is room for the operating rate to continue to increase.
<h2>Shenwan Hongyuan's main viewpoints are as follows:</h2>
Narrowing supply and demand for ethylene glycol, profitability expected to rise
The price of ethylene glycol has basically been in a low-level fluctuation in recent years, and the price center is expected to start rising in 2024. The current price is basically at 4,700 yuan/ton, which is at a medium-low level historically. From 2023 to 2024, with the capacity expansion of downstream polyester filament, bottle chips, and other products, the demand for ethylene glycol will grow significantly, driving a recovery in prosperity. It is expected that under the tightening supply and demand, there is room for the price center of ethylene glycol to continue to rise.
In terms of demand, from 2023 to 2024, the rapid increase in polyester industry output will have a significant pull on ethylene glycol demand. It is estimated that the output growth of major downstream polyester products in 2023/2024 will be 8.26 million/7.91 million tons, corresponding to an increase in ethylene glycol demand of about 2.76 million/2.64 million tons. In the future, as the capacity of polyester products increases, the demand for ethylene glycol will continue to grow. On the supply side, due to weakened profitability of ethylene glycol, the industry's supply growth rate has slowed in the past two years. It is expected that by 2025-2026, new domestic capacity will reach 2.8 million tons, with capacity growth being less than that of downstream, hence it is anticipated that the supply and demand for ethylene glycol will continue to tighten in the future.
Regarding the operating rate, the current profitability at the coal end has turned positive, and with the decline in coal prices, there is room for the operating rate to continue to increase. However, on the oil end, since the facilities can switch between ethylene oxide and ethylene glycol, the price difference between the two needs to be considered. The current EO-1.25*EG price difference is about 1,113 yuan/ton, while the historical average level is about 1,558 yuan/ton. Therefore, the operating rate of ethylene glycol at the oil end still needs to see price increases for further improvement.
Upstream sector: Oil prices rise, self-elevating drilling daily fees decline
As of the close on February 21, 2025, Brent crude oil futures closed at $74.43 per barrel, a decrease of 0.41% compared to the previous weekend; NYMEX futures prices closed at $70.40 per barrel, a decrease of 0.48% compared to the previous weekend; the weekly average prices were $75.60 and $71.66 per barrel, with changes of 0.05% and -0.20%, respectively.
On February 14, U.S. commercial crude oil inventories stood at 432 million barrels, an increase of 4.63 million barrels from the previous week, and crude oil inventories were 3% lower than the same period in the past five years; total gasoline inventories were 24.8 million barrels, a decrease of 150,000 barrels from the previous week, and gasoline inventories were 1% lower than the same period in the past five years; propane/propylene inventories decreased by 3.59 million barrels. The U.S. strategic petroleum reserve is 395 million barrels, unchanged from the previous period. As of February 21, 2025, the number of U.S. drilling rigs was 592, an increase of 4 rigs from the previous period but a decrease of 34 rigs year-on-year;
The daily rental rate for self-elevating platforms remained flat this Sunday, while the daily rental rate for semi-submersible platforms was also flat on a week-on-week basis; the utilization rate for self-elevating platforms increased week-on-week, while the utilization rate for semi-submersible platforms remained flat.
Shenwan Hongyuan believes that there is a widening trend in crude oil supply and demand, expecting downward space for oil prices. However, supported by OPEC's production cuts and shale oil costs, prices are expected to maintain a medium to high level of volatility in the future. The upstream oil service sector has shown a noticeable warming trend, but current daily rental rates are still at a low level. It is anticipated that as global capital expenditure rises, there will be significant room for improvement in drilling daily rental rates.
Refining Sector: Overseas refined oil crack spreads rise, olefin spreads fluctuate
As of the week ending February 21, 2025, the comprehensive crack spread for major refined products in Singapore was USD 13.63/barrel, an increase of USD 0.17/barrel from the previous week. For the same week, the gasoline RBOB and WTI crude oil spread in the U.S. was USD 24.92/barrel, a decrease of USD 1.34/barrel from the previous week, with a historical average of USD 24.88/barrel. In terms of olefins, according to Longzhong data, the ethylene spread was USD 219.33/ton, an increase of USD 14.88/ton from the previous week, with a historical average of USD 411/ton. Northeast Asia's propylene was USD 860/ton. The propylene and propane spread was USD 107.60/ton, a decrease of USD 4.10/ton from the previous week, with a historical average spread of USD 265/ton.
Shenwan Hongyuan believes that with the oil price correction, refining profitability has improved. Although the domestic refining product spread level has increased, it is still at a low level. It is expected that as the economy recovers, the profitability of refining products will gradually improve.
Polyester Sector: PTA profitability rises, polyester filament profitability declines
According to Longzhong data, as of February 19, the closing price for PX in the Asian market was USD 885.40/ton, a week-on-week decrease of 0.20%. The PX and naphtha spread was USD 218.55/ton, a decrease of USD 1.57/ton from the previous week, with a historical average of USD 389/ton. PTA prices shifted from rising to falling; for the week ending February 19, 2025, the average spot price for PTA in East China was CNY 5078.00/ton, a week-on-week decrease of 0.04%. The PTA-0.66*PX spread was CNY 259/ton, an increase of CNY 49/ton from the previous week, with a historical average of CNY 793/ton. The POY spread for polyester filament was CNY 1280/ton, a decrease of CNY 4/ton from the previous week, with a historical average of CNY 1403/ton.
Shenwan Hongyuan believes that the overall performance of the polyester industry chain is average at present, and attention should continue to be paid to changes in demand. In the medium to long term, as new industry capacity is expected to taper off in the next two years, it is anticipated that the industry will gradually improve starting this year.
Investment Recommendations
Oil prices are expected to maintain medium to high volatility in the short term, with an overall expectation for 2025 to remain at a high level, showing a trend of high first and low later. The operational quality of oil companies is gradually improving, recommending high dividend yield stocks such as PetroChina (601857.SH) and China National Offshore Oil Corporation (600938.SH); the upstream exploration and development sector maintains high prosperity, and offshore capital expenditure is expected to remain at a high level. We continue to be optimistic about the performance improvement of offshore oil service companies, recommending China Oilfield Services (601808.SH) and CNOOC Engineering (600583.SH);
The supply and demand for ethane in the United States remains loose, and the ethane-to-ethylene route continues to maintain a high level. We are optimistic about the expansion of ethane-to-ethylene projects domestically, with a strong recommendation for Satellite Chemical (002648.SZ).
In the downstream polyester sector, there is room for recovery in the context of slowing supply growth, with a strong recommendation for high-quality polyester filament company Tongkun Co., Ltd. (601233.SH); in the refining and chemical sector, after the recent decline in oil prices, there are expectations for cost improvements and room for price spread recovery. We suggest paying attention to high-quality large refining companies Hengli Petrochemical (600346.SH), Rongsheng Petrochemical (002493.SZ), and Dongfang Shenghong (000301.SZ).
Risk Warning
Geopolitical impacts; fluctuations in oil and chemical prices; economic downturn risks; impacts of the global pandemic

603225

600346

603073

601233

Shenwan Hongyuan released a research report indicating that from 2023 to 2024, with the capacity expansion of downstream polyester filament and bottle chip products, the demand for ethylene glycol will significantly increase. It is expected that the tightening supply and demand will drive the price center of ethylene glycol upward. Currently, the price of ethylene glycol is about 4,700 yuan/ton, which is at a historically low to medium level. The rapid growth of the polyester industry in the future will further boost the demand for ethylene glycol, with an expected demand increase of approximately 2.76 million tons in 2023 and 2.64 million tons in 2024. On the supply side, the industry's growth rate is slowing down, with an expected new capacity of 2.8 million tons in 2025-2026, and supply and demand will continue to tighten

Zhitong

XfmGroup

HLSH

Cady

TKGF

CNOOC

EASTERN SHENGHONG

PETROCHINA

RSPC

COOEC

SWHY

CHINA OILFIELD

Shenwan Hongyuan: Ethylene glycol supply and demand narrowing, profitability expected to rise