SunSirs: Disruptions to Middle East Shipping Routes Further Tighten Ethylene Glycol Supply

【Middle East Routes: Near-Total Disruption】

Supplies from the Middle East, which typically account for approximately 66% of China's ethylene glycol imports, are expected to drop to zero in August as key shipping routes face renewed conflict-related disruptions. During the US-Iran ceasefire in June and July, a brief window of openness allowed some floating cargoes to pass through the Strait of Hormuz to India, Southeast Asia, and China. However, geopolitical tensions escalated again in mid-July, effectively sealing off the strait; daily vessel traffic has fallen below 20 ships (consisting mainly of Iranian tugs, Ro-Ro vessels, and small-tonnage ships).

Loading operations on Saudi Arabia's west coast have also stalled since late July due to Houthi attacks on Saudi-flagged vessels, leaving two ethylene glycol shipments originally scheduled for China sitting idle. Shipowners and suppliers are becoming increasingly cautious; rerouting via the Suez Canal would significantly increase transport costs and voyage times. While some west coast loading operations might resume as early as next week, this remains unconfirmed. With both the Strait of Hormuz and the Bab el-Mandeb Strait effectively blocked, no Middle East ethylene glycol is expected to arrive in China in August, and September import volumes also face downside risk.

【North American Market: Arbitrage Window Closed; Canadian Supply Stable】

The economics of US-China arbitrage remain unfavorable, limiting spot market activity and restricting trade primarily to the fulfillment of existing contracts. As of July 8, the US Gulf Coast MEG FOB price was assessed at around $570/tonne; the price spread between the US and China narrowed to just $50/tonne—insufficient to cover freight costs—causing US cargoes to continue flowing to India and Europe rather than China.

Renewed tensions in the Middle East have spurred inquiries in the US spot market for August, but high local prices continue to discourage shipments to China, keeping cargo flows limited to contracted volumes. Unplanned shutdowns at Lotte and Nan Ya’s No. 2 units have further tightened supply, while Canadian MEG plants continue to operate at full capacity, maintaining a steady supply of approximately 80,000 tonnes per month to China.

[Intra-regional Routes: Northeast Asia Gradually Recovers; Southeast Asia Remains Supply-Constrained]

Regional supply is improving as ethylene glycol units in South Korea and Taiwan restart and ramp up operating rates from early June. In late June, some floating cargoes from the Persian Gulf were diverted to Southeast Asia, temporarily bridging the local supply gap. Starting in July, shipments from South Korea and Taiwan resumed flowing to mainland China; South Korean arrivals totaled approximately 18,000 tonnes for the month, with August arrivals from these regions projected at around 30,000 tonnes.

A supply deficit persists in Southeast Asia; while buyers are reportedly inquiring about export cargoes from the Chinese market, no confirmed transactions have been reported so far. Looking ahead, non-Middle Eastern supplies are expected to be prioritized for allocation to this region.

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