FOCUS: Asia MEG up on less deep-sea cargo

22 May 2007 04:13  [Source: ICIS news]

By Salmon Aidan Lee

SINGAPORE (ICIS news)—Decreasing monoethylene glycol (MEG) from deep-sea sources to Asia since earlier this year are pushing up prices, buyers and sellers said on Tuesday.

MEG spot prices rose to $950-965/tonne CFR (cost and freight) China late last week, up from $900-905/tonne in mid April and $885-895/tonne early that month.

“We have not shifted any MEG this year to Asia,” a source from Vinmar International, a US-owned trading house which specialises in America-to-Asia MEG shipments, said.

“There is no margin to talk about, so we don’t see the point of doing it,” the Vinmar source added.

Traders estimated that an average of 25,000 tonnes of MEG produced in North America – mainly the US Gulf, Mexico and Brazil – is sold to the Asian market monthly, with the bulk going to China.

And every month, about 5,000-8,000 tonnes of European MEG – mainly Russian-made products – also found their way into Asian outlets last year.

“This year, there had been almost no Russian MEG [into Asia], and I can say I did not shift any MEG from [North] America,” a source from Oxyde Chemical, another trader which specialises in America-to-Asia MEG shipments, said.

A Belgium-based trader shifted a combined MEG and diethylene glycol cargo to Asia earlier this year, but stopped doing so after that “due to poor margins”.

“There had been new downstream capacities in Europe, so the Russian MEG need not be sold to Asia anymore,” said a source from the Indorama group, a major polyester and polyethylene terepthalate (PET) producer which started up bottle-grade PET capacities in eastern Europe last year.

Prices of MEG had also been consistently higher in the Americas, compared to Asia. Last week, for example, fibre-grade MEG prices were as high as $947/tonne in the US Gulf, while they were at $950-965/tonne CFR China in Asia.

“Freight rates had become so expensive, so the arbitrage window is simply closed,” said a source from ICC, a third company specialising in America-to-Asia MEG shipments.

Producers in the US Gulf had also seen lower glycols yield in recent months, given firm ethylene oxide (EO) prices at 65.00-69.00 US cents/lb FCA and better margins from other EO derivatives, such as ethanolamines and ethoxylates.

A prolonged outage at Huntsman’s plant at Port Neches in Texas and the mothballing of one of Shell Chemicals’ Geismar units also meant reduced supply from the US pool, traders said.

Yet at least one producer in the US was still sending MEG to Asia, although it would not relieve the tightness in Asia.

Formosa Plastics Co (FPC), which operates a 300,000 tonne/year plant at Point Comfort in Texas, continues to ship about 6,000-8,000 tonnes of MEG on a monthly basis.

“These supplies are mainly for our downstream plants,” said a Taiwanese source close to FPC, which is part of Formosa group.

“In this scarce market, we’ve to look into our own downstream needs first, before we can see whether to sell anything to others. But I can tell you, I’m not even sure myself if the supplies will never be disrupted, given the poor economics sending deep-sea MEG to Asia,” the source added.

By: Salmon Aidan Lee
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