What to expect from the EO market as Yangzi Petrochemical restarts

Sinopec Yangzi Petrochemical's 300 kt/year EO-EG unit in East China is scheduled to restart in September after being idle since late 2022. Yangzi Petrochemical had shut down in March 2022 for a complete conversion to EO production, restarting in August with a focus on ethylene oxide. However, the unit only ran briefly before another shutdown in early December 2022. The plan now is to restart in early September, primarily producing EO, with a limited daily output of a few dozen tons of MEG.

The decision to restart the Yangzi Petrochemical unit is partly driven by economic factors. Recently, EO prices in East China have hovered around 6,900 yuan/mt, offering marginal profitability and better returns compared to other ethylene downstream products. Shenghong Refining & Chemical had also considered restarting its 100 kt/year EO unit to reduce EG output.

Additionally, the restart is influenced by the scheduled maintenance of other EO units in Jiangsu, which will tighten supply in the region, potentially improving the supply-demand balance. Over the next two months, several producers, including Dena, Jinyan, and Far Eastern Union Petrochemical, have maintenance plans:

In summary, EO supply-demand dynamics in the Suzhong and South Jiangsu regions will be tight over the next two months, with supply constraints expected. Conversely, supply in Subei and Shandong remains ample, with market focus on the operation of Satellite Petrochemical's unit.

The EO market exhibits regional disparities. In Zhejiang, the market is relatively balanced before ZRCC's new unit restart, with companies like Sanjiang Chemical maintaining high operating rates to minimize EG output. In North China, EO supply is tight due to shutdowns at Jilin Petrochemical and Northern Chemical. However, the latter is set to restart by month-end, easing supply constraints slightly, while Jilin's restart schedule remains unclear.

On the demand side, as high temperatures subside, construction projects are resuming, leading to a modest increase in domestic concrete production capacity utilization and delivery volumes in some regions. This has slightly boosted water-reducing agent prices. Additionally, downstream markets like surfactants and diethanolamine have shown price resilience, providing some support for demand.

Looking ahead, the EO market is expected to remain stable with fluctuations, supported by the moderate recovery of water-reducing agent production and firm ethylene costs. Regional differences will persist, with Northeast and Suzhong/South Jiangsu markets performing relatively well, while Central and South China may experience weaker conditions.