Euro PET producers face tough June MEG contract talks

17 May 2005 15:00  [Source: ICIS news]

LONDON (CNI)--European polyethylene terephthalate (PET) producers are preparing for what might prove to be a difficult round of negotiations for June fibre grade mono ethylene glycol (MEG) contracts, CNI learned on Tuesday.

Most market observers expect a hefty decrease from May’s Euro942/tonne FD NWE (free delivered Northwest Europe) settlement. Their expectations are based upon a $260-280/tonne decline in Asian contract nominations May to June to $800/tonne CFR China Main Port (CMP).

However, a couple of PET producers said they also expect some compensation for what they see as an over-priced May contract given the recent collapse in MEG spot prices.

Meanwhile, at least one other PET producer said that it will not negotiate June prices until the May contract has been revised, a situation which most market participants claimed was unlikely.

April and May contracts were finalised in tandem on 15 April following some discord over the parties involved in the initial April contract; April was settled at Euro950/tonne FD NWE – up Euro30/tonne and May at Euro942/tonne FD NWE – down Euro8/tonne.

Spot levels have dropped by around 15% to Euro610-630/tonne CIF NWE for bulk lots since the April-May settlement and further erosion is expected. Global MEG prices have been under pressure because of oversupply and poorer than expected demand from China. A very slow start to the traditional peak demand period for PET in Europe was also to blame, according to market sources.

By: Nel Weddle
+44 20 8652 3214

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