SunSirs: Dragged Down by Demand, Diethylene Glycol Market Retreated Under Pressure

Price Trend

On May 19, lackluster shipments from major ports and insufficient support from the demand side caused the price center of the domestic diethylene glycol market to retreat. In the mainstream spot market, prices in East China closed at 7,035 RMB/ton, down 135 RMB/ton; in South China, weak buying interest for actual orders led to a downward trend in the market, closing at 7,100 RMB/ton, down 200 RMB/ton; and the CFR China price closed at $862/ton, down $18/ton.

Fundamental Analysis:

Supply: As of May 18, port inventories of diethylene glycol (DEG) in the East China region stood at 16,200 tons, a decrease of 4,900 tons compared to the previous statistical period. This week (May 19–25), scheduled DEG arrivals at Zhangjiagang are projected at 2,800 tons. Arrivals remain relatively low this week; coupled with sluggish downstream order volumes—where purchasing is largely limited to immediate necessities—the major ports in East China are expected to continue experiencing inventory depletion.

Demand: Following the holiday period, the resumption of operations at downstream manufacturing plants has been slow. According to statistics, as of May 15, the average operating rate at domestic unsaturated resin plants stood at 36%—an increase of 16.0% compared to the previous period—with manufacturers procuring raw materials on an "as-needed" basis. Data indicates that from May 15 to May 17, the total shipment volume from the two warehouse zones in Zhangjiagang amounted to 1,846 tons, representing a daily average of 616 tons. On May 18, the total shipment volume from these two zones was 302 tons, a decrease of 337 tons compared to the previous day.

Costs: U.S. officials have denied that the United States agreed to temporarily waive sanctions on Iranian oil during ongoing negotiations. Conflicts in the Middle East are driving up crude oil costs; the International Energy Agency reports that commercial oil inventories are depleting rapidly, with only a few weeks' supply remaining. The release of oil from strategic reserves has added 2.5 million barrels per day to the market; however, these reserves are not inexhaustible, and international crude oil prices therefore have room to rise.

Market Outlook

The situation in the Middle East continues to unnerve the market; significant divergences persist in the negotiations between the U.S. and Iran, fueling market concerns that the risk of escalation remains. Consequently, the market currently finds itself in a short-term environment characterized by weakness in both supply and demand.

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