Europe MEG waiting for final July settlement

17 July 2008 13:44  [Source: ICIS news]

LONDON (ICIS news)--The European monoethylene glycol (MEG) market was waiting for confirmation of a July settlement, with sellers not ready to follow the initial €60/tonne ($95/tonne) contract hike to €940/tonne, they said on Thursday.

“I understand buyers’ position and their need to pass costs on downstream but we are still working on a higher number," said one producer.

"It is tougher than in the past and it makes things difficult for the whole market but it’s unavoidable.”

An initial settlement was reported last week on a free delivered (FD) northwest Europe (NWE) basis, up €60/tonne from June.

The market had been split with sellers aiming to cover the €190/tonne upstream third-quarter ethylene contract hike while buyers referred to parity with Asian costs, where July nominations had moved up $60/tonne, in justifying a smaller increase.

Subsequent August Asian nominations at a rollover from SABIC and Shell had made talk of a higher European price for July difficult, conceded one seller. MEGlobal had announced a $40/tonne rise.

“At the moment we either see the chance of following the July number and then moving on to August or a joined settlement coming out for the two months,” said one consumer.

“Yes we accept that MEG producers are approaching the cost floor and need to be in the black but at the moment they are the only ones in the chain making money and everyone else’s margins are being squeezed,” added the source.

European spot prices were shifting up, with truck business reported around €900/tonne FCA (free carrier) NWE.

An upturn in demand from smaller consumers was noted, in addition to signs of reduced output from MEG sellers fearful of the ethylene cost pressure.

Major MEG contract players include Shell, BASF, MEGlobal, INEOS Oxide, Clariant, M&G and Artenius.

($1 = €0.63)

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By: Edward Cox
+44 20 8652 3214

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