SunSirs: Geopolitical Premium Faded, and Ethylene Glycol Prices Dropped Rapidly

Ethylene Glycol Prices Lowered in Early May

In May 2026, ethylene glycol prices experienced a decline. According to data from SunSirs, as of May 8, the average domestic price for oil-based ethylene glycol stood at 5,050 RMB/ton—a decrease of 2.04% compared to the average price of 5,155 RMB/ton recorded on April 30.

Regarding port-side Ethylene Glycol: as of the 8th, basis quotes for spot contracts (minimum 500 tons) fluctuated in tandem with futures market movements. Throughout the week, intraday basis quotes for spot contracts traded within the range of +114 to +118. By the close of trading, the basis quote for this week's contracts (prior to May 8) stood at +115 (specifically applicable to the "Dual Warehouse" system, effectively referring to the Yanghong warehouse); basis quotes for next week's contracts ranged from +120 to +125, while quotes for late-May contracts ranged from +135 to +140.

n the domestic market, the ex-works price (full truckload basis—bulk, tax-inclusive, and ex-plant pickup) for coal-based polyester-grade Monoethylene Glycol (MEG) is currently trading within the range of 4,580–4,630 RMB/ton.

Regarding international MEG markets, as of May 7, negotiated CIF prices for shipments bound for China were settling around $620/ton, while negotiated CIF prices for shipments bound for Southeast Asia were settling around $720/ton.

Changes in Ethylene Glycol Port Inventories in May 2026

As of May 6, 2026, the total spot inventory of ethylene glycol at major ports in East China stood at 763,000 tons—a decrease of 190,000 tons compared to the 953,000 tons recorded on March 30.

An Analysis of the Reasons Behind the Price Decline of Ethylene Glycol in Early May 2026:

In early May 2026, ethylene glycol prices underwent a rapid downward correction. The primary drivers were the dissipation of the Middle East geopolitical premium—which triggered a collapse in production costs following a sharp plunge in crude oil prices—compounded by weak downstream polyester demand, declining operating rates in the terminal weaving sector, and a high-level market pullback triggered by a concentrated exodus of capital.

Core Reasons for the Decline: Easing Geopolitical Tensions → Crude Oil Plunge → Collapse of Cost Support

From March through early May, conflicts in the Middle East (specifically between the U.S. and Iran, and regarding the Strait of Hormuz) drove up geopolitical risk premiums for both crude oil and ethylene glycol, resulting in a sustained upward trend in prices. On May 6, as the U.S. and Iran neared an understanding—and expectations rose that transit through the Strait of Hormuz would be restored—market panic subsided. International crude oil prices reacted immediately with a sharp decline; Brent crude, for instance, fell by over 4% in a single day. Consequently, the cost of oil-based ethylene glycol production retreated rapidly, and the previously inflated geopolitical risk premiums were effectively squeezed out of the market. Furthermore, the restart of a 500,000-ton/year ethylene glycol facility in Iran bolstered expectations of a recovery in overseas supply, thereby exerting further downward pressure on prices.

Weak Fundamentals: Sluggish Downstream Demand Triggers Upstream Negative Feedback

In the polyester sector, major filament manufacturers initiated a 30% production cut effective April 20, a measure expected to persist through the end of the second quarter. While the polyester operating rate stands at approximately 81%, sales remain sluggish, leading to an accumulation of inventory. In the downstream weaving sector, operating rates have fallen below 50%; with insufficient orders from both domestic and international markets, purchasing activity is limited primarily to meeting immediate, essential needs, and the willingness to restock remains low. High prices are further dampening inventory-building efforts; following an earlier surge that pushed Ethylene Glycol prices above 5,000 RMB per ton, downstream buyers have resisted these elevated price levels—opting instead to procure strictly on an "as-needed" basis—meaning the recent price rally lacks the sustained demand support necessary to be maintained.

Market Sentiment & Capital Flows: Concentrated Capital Exits; Futures Drag Down Spot Prices

Previously, long positions were overcrowded; from March through early May, capital flowed into bets on Middle East conflicts and inventory drawdowns, resulting in a concentration of long futures positions and elevated price levels. News developments subsequently triggered a stampede: following reports of easing geopolitical tensions on May 6, short positions increased while long positions were liquidated via stop-losses. Consequently, futures prices plummeted on heavy volume, breaching key support levels. Basis Weakens: Spot prices tracked the decline, causing the basis—the spread between spot and futures prices—to narrow from a premium of 130 RMB/ton to approximately 115 RMB/ton, signaling a weakening of spot market support.

Market Outlook

The current price correction is primarily driven by the dissipation of geopolitical premiums and a collapse in production costs. This trend is compounded by weak demand and capital outflows, resulting in a high-level pullback rather than a fundamental reversal in supply-demand dynamics. In the short term, prices are expected to fluctuate in response to crude oil market movements and geopolitical developments; over the medium term, market direction will continue to hinge on the interplay between production costs, the pace of supply recovery, and the strength of downstream demand.

In the near term, market attention will focus primarily on the volatility of the Middle East situation—specifically the progress of U.S.-Iran negotiations and actual transit conditions through the Strait of Hormuz—as these factors will determine whether geopolitical risk premiums for crude oil and ethylene glycol fluctuate. Furthermore, the trajectory of crude oil prices is critical; given the high proportion of ethylene glycol produced from oil-based feedstocks, fluctuations in crude oil prices will directly impact production costs and the central price level. On the downstream side, operating rates and order volumes within the polyester sector—along with the strictness of production cuts and the rate at which finished textile inventories are being depleted—will determine whether demand sees a marginal improvement. Finally, regarding port inventories and incoming shipments, the volume of arrivals expected in mid-to-late May and the pace of inventory drawdown will serve as key indicators for assessing whether the current tight balance between supply and demand is likely to persist.

SunSirs has been continuously tracking price data for over 200 commodities for nearly 20 years, please contact support@sunsirs.com for subscription.