Initial August MEG settlement causes seller stir

26 July 2007 17:29  [Source: ICIS news]

By Ed Cox

LONDON (ICIS news)--European mono ethylene glycol (MEG) sellers have reacted with frustration to the initial August settlement, saying on Thursday that the price was unacceptably low.

A contract was agreed on Monday at €830/tonne ($1,137/tonne) FD (free delivered) NWE (northwest Europe), down €12/tonne from July.

As of Thursday, no other producers and consumers had followed this number. Part of this was attributed to player absence caused by holidays.

Those producers available, however, said that they had no intention of following the number, and that a rollover would have been a much fairer outcome.

One European manufacturer said it could not understand why a decrease had been agreed, when material was tight and spot prices had been moving up for several months.

A second supplier said it was ‘more than just upset’, agreeing with the first seller’s comments and adding that firming spot prices in China - which play a role in the global direction of MEG prices - further undermined the European settlement.

The source added that it would only agree to the €830/tonne FD NWE level if it could factor in some kind of compensation to the September contract at the same time.

This issue could last well into August, the source added.

Unsurprisingly, consumers have been more favourable towards the settlement. One said it was absolutely justified, based on the weakening of the US dollar against the euro since the last agreement and the rollovers announced by sellers in Asia for their August contract nominations.

Weakness in the major European derivative polyethylene terepthalate (PET) sector in July added further weight to the need for an MEG decrease, said one source.

One consumer said it was hoping to follow the number this week, providing one of its contract partners was prepared to do so.

The seller involved in the first settlement said that exchange rates had played a key role in the price, adding that the firm supply situation in Europe had already been shown by the €22/tonne increase agreed on the July contract.

MEG contract players include Shell, BASF, MEGlobal, Clariant, M&G, Invista and Eastman.

($1 = €0.73)

By: Edward Cox
+44 20 8652 3214

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly