FocusBuyers hope Europe MEG will soften

13 July 2007 12:49  [Source: ICIS news]

LONDON (ICIS news)--After five months of gradual price increases, European mono ethylene glycol (MEG) buyers were hoping the market would soon soften, they said on Friday.

 

The monthly contract level has risen from €768/tonne ($1,052/tonne) in January to €842/tonne FD (free delivered) NWE (northwest Europe) by July.

 

The increases have been based on higher priced nominations from Asian sellers which play a key part in European contract talks together with firm fundamentals in Europe.

 

This week, the three usual Asian sellers announced rollovers for the August contract price.

 

SABIC said it would hold at $1,010/tonne CFR (cost and freight) Asia. MEGlobal and Shell Chemicals quoted prices at $1,020/tonne CFR Asia and $990/tonne CFR Asia respectively.

 

The announcements have led to speculation from some buyers that the European August contract could roll over or even decrease, with some noting improving domestic supply as further justification.

 

Most said it was too early to discuss price movements closely, preferring to wait until later in July to assess the euro/dollar exchange rate along with supply and demand balances in Europe. 

 

However, suppliers were still optimistic that the market would stay firm in August.

 

Offtake into the major polyethylene terephthalate (PET) bottle-grade sector should stay healthy, depending partly on if the weather is good in Europe, which will mean good demand for MEG, said one supplier.

 

Sellers also report limited import opportunities into NWE, including from Russia.

 

A Polish producer said this week it was sending less MEG to West Europe than normal, because of increased internal consumption.

 

The three shutdowns at European producers, between now and September, will keep a lid on additional availability, said one manufacturer.

 

Spot MEG prices have increased from below €600/tonne CIF (cost, insurance, freight) NWE in February to above €700/tonne CIF NWE by early July.

 

Some traders noted more resistance to a further push for higher prices this week, although little activity was noted.

 

Most sources expect more material to flow to Europe in the future, given new capacities due in Asia and the Middle East. Consumers are hoping later in the year.

 

Sellers are doubtful, saying that this has long been expected but has not come about.

 

Price decreases are unthinkable, given firm upstream ethylene, naphtha and crude oil costs, said one.

 

At the moment, producers will try to make the most of their healthy position in the market.

 

($1 = €0.73)

By: Edward Cox
+44 20 8652 3214

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