European buyers benefit despite price increases

07 July 1997 00:00  [Source: ICB]

Tight ethylene glycol markets have sent prices soaring. Only when new capacity is commissioned in the Middle East is the situation likely to ease.

Europe's ethylene glycol buyers are enjoying some of the lowest prices in the world despite the DM110/tonne rise in fibre grade contract prices for the third quarter to DM1150/tonne FD.

Far East third quarter contract prices of $700/tonne CFR are, according to market observers, 10% higher on a gross basis than the European number while posted US prices of 34 cent/lb for fibre grade in July are equivalent to almost $750/tonne.

Spot ethylene glycol prices have surged on both sides of the Atlantic, the result of increased demand for antifreeze blending coupled with good demand for fibres and resin at a time when world stocks of MEG are critically low. In Europe, spot numbers as high as DM1300/tonne FCA NWE have been achieved in June, although antifreeze blenders have yet to come into the market in earnest. However, in the US, where the antifreeze season is already well under way, spot prices are talked significantly higher at 36-37 cent/lb. The impact of the lower European numbers is that spot material normally destined for western Europe has been diverted to more lucrative markets.

Sources report as much as 10 000 tonne of European material, some of Russian origin, purchased by Dow in July at prices around 35-36 cent/lb cif Gulf, mainly for antifreeze blending.

Dow would not confirm prices and quantities, but said purchases were to cover turnarounds at Plaquemine, US, and Fort Saskatchewan, Canada, in August and September respectively.

In Europe, production problems at ethylene glycol plants has prevented producers from building up inventories ahead of the antifreeze season.

In June, Endölchemie suffered an outage at its Dormagen unit and Inspec's Antwerp plant was down for five days because of compressor problems. Union Carbide's Wilton plant is said to be operating with one reactor off-line.

In addition, BASF has a three-week scheduled outage at its Ludwigshafen ethylene oxide unit in June-July and an unscheduled one week outage at Antwerp in September. 'Low producer inventories and a shortage of exotic material mean antifreeze blenders struggling to find material,' said one source.

North America has not escaped problems. According to market sources, Dow's tight inventory position following a six-week outage at its Canadian plant in Fort Saskatchewan early in the year has prompted the producer to delay the closure of its ethylene oxide and ethylene glycol unit in Leuna, Germany, originally scheduled for 1 July, until the end of 1998.

Dow denies this, saying improved ethylene availability at Leuna is the main reason. Only in the Far East are inventories showing the first signs of rising mainly the result of pre-buying ahead of further anticipated price hikes. Far East spot ideas are around $700/tonne CFR.

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