CITIC Construction Investment Futures: Even if the Strait of Hormuz resumes operation, the short-term decline in ethylene glycol imports will still be difficult to offset.

Domestically, the ethylene glycol industry’s operating load decreased by 0.1% month-on-month to 65.7%, among which, synthetic gas-based production increased by 2.0% month-on-month to 75.2%, reaching a high level for the same period in previous years. The profit from synthetic gas-based ethylene glycol has been significantly restored as prices rise, and it is expected that the probability of increased production after maintenance is high. Yesterday, the upward logic for ethylene glycol was based on the ongoing tension between the US and Iran, as well as the news of an attack on the Jubail industrial zone in Saudi Arabia. The Jubail industrial zone is one of the world’s important petrochemical production bases, with an annual output of about 60 million tons of petrochemical products, accounting for 6% to 8% of the global total. The area hosts several large petrochemical companies and projects, including PC, Sharq, Kayan, etc., with ethylene glycol capacity accounting for about 8.0% of the global share. The market previously expected that due to the inability to navigate the Strait of Hormuz, ethylene glycol imports would significantly decrease; this attack has further intensified market concerns, and the progress of plant recovery after the attack will continue to be delayed, with the actual impact to be assessed. Overall, even if the Strait of Hormuz resumes operation, the short-term reduction in ethylene glycol imports will still be difficult to make up, and the significant reduction in supply will support ethylene glycol prices. (CITIC Construction Investment Futures)