The diethylene glycol (DEG) market of China has entered a volatile adjustment phase, jointly affected by geopolitical changes, domestic supply fluctuations, sluggish downstream consumption and new carbon reduction policies. The reopening of the Strait of Hormuz after the US-Iran agreement eased previous supply worries, pushing DEG spot prices down from recent record highs. Although low port stockpiles and centralized factory maintenance provide bottom support for prices, persistent weak downstream demand restricts any upward rebound. This article sorts out the current DEG market conditions from market price, supply structure, industrial development and national policy four dimensions, and forecasts the short and medium-term market trend.
Market Overview: DEG Prices Pull Back Amid Mixed Long and Short Factors
The US-Iran reconciliation and unblocked Strait of Hormuz are the core drivers reversing DEG market sentiment this year. Geopolitical risks that once boosted import cost and spot quotations have faded, triggering a clear downward correction in domestic DEG prices.
Looking at specific price data, East China DEG spot price dropped 250 RMB per ton to 7,170 RMB/ton on June 15, while South China market fell 100 RMB per ton to 7,400 RMB/ton. Back in April, DEG prices experienced sharp roller-coaster volatility, once surging to 7,940 RMB/ton before a rapid slump.
Two opposite forces are simultaneously affecting the market trend. The bullish support comes from extremely low port inventories standing at only around 9,800 tonnes, plus multiple domestic DE production lines under long-term shutdown for maintenance, which keeps short-term domestic supply tight.
The dominant bearish factor is sustained weak downstream consumption. The operating rate of unsaturated resin, the largest downstream consumption field of DEG, only stays between 30% and 35%. Downstream manufacturers adopt strict just-in-time purchasing mode with no stock-up willingness, which greatly drags market transaction activity. Besides, a large number of delayed import cargoes from the Middle East will arrive in batches later, bringing additional supply pressure to the whole market.
Market participants generally judge that China’s DEG market will keep a weak range-bound operation in the short run. Supported by tight domestic supply, there is little possibility of a sharp collapse in product prices.
Supply Side: Tight Domestic Output vs Gradually Recovered Import Volume
China’s DEG supply market shows a clear split pattern: domestic production shrinks continuously, while import shipments will rebound significantly in the following months.
Multiple mainstream DEG manufacturers have launched long-cycle maintenance plans recently, covering Fujan Gule, Zhejiang Petrochemical, Far Eastern Union, Yangzi Petrochemical and Hainan Refining & Chemical. Among them, the maintenance cycle of Hainan Refining & Chemical’s production line reaches five months, directly cutting domestic total output. Affected by centralized maintenance and low inventory levels, some manufacturers hold goods back and stop external quotation to wait for better prices.
Import volume has seen dramatic fluctuations this year due to strait shipping restrictions. China’s DEG imports in April slumped 83.75% month-on-month to merely 5,800 tonnes, resulting in serious supply shortage nationwide. After the Strait of Hormuz resumed normal shipping, all previously stranded overseas cargoes will be delivered to Chinese ports successively, which will ease the tight supply situation and change the original supply-demand balance.
Industry Development: New DEG Capacity to Be Launched, Manufacturers Expand Export Channels
China’s DEG industry will face greater supply pressure in the future, while domestic producers accelerate overseas layout to digest excess capacity.
Three major new DEG projects are scheduled to put into operation in 2026, including BASF-Zhanjiang, Zhongsha Gule and Huajin-Aramco, with a total new annual production capacity of 220,000 tonnes. The continuous release of new capacity will intensify internal competition in the domestic DEG market for a long time.
To cope with oversupply risks, chemical enterprises actively explore cross-border export markets. Sinopec International Trading made a breakthrough by exporting DEG products manufactured by Hainan Refining & Chemical to Southeast Asia relying on Hainan Free Trade Port policy advantages, opening up stable long-term overseas sales channels. As a result, China’s DEG export volume hit a new historical high of 14,700 tonnes in April, showing obvious export growth momentum.
Policy Direction: Energy Saving & Carbon Reduction Becomes Permanent Industrial Guidance
A series of national energy conservation and carbon reduction policies have drawn long-term development blueprints for ethylene and downstream DEG industry, forcing the whole sector to complete green transformation.
On June 15, five national ministries led by the National Development and Reform Commission jointly issued a three-year special action plan for energy-saving and carbon-reduction transformation of key chemical industries, marking ethylene related production lines as priority transformation targets. Units failing to meet national energy efficiency standards will face compulsory elimination within the specified time.
The regulatory logic of petrochemical industry has transformed from single energy intensity control to comprehensive carbon emission intensity control. Seven ministries have also released supporting documents to speed up the phase-out of outdated high-energy-consumption equipment in petrochemical factories. Green, low-carbon and energy-saving upgrading has become an irreversible long-term trend for all DEG manufacturers and upstream ethylene plants.
Conclusion
China’s DEG market is currently caught between tight domestic supply and sluggish downstream demand, with imported cargoes and new capacity bringing medium-term bearish pressure. Short-term spot prices will maintain weak fluctuations without sharp rises or falls. In the long run, continuous new capacity release and national carbon reduction policies will reshape the competition landscape of the whole industry. Expanding overseas export markets will become an important way for domestic DEG suppliers to relieve domestic supply pressure and maintain stable operation.
