Europe spot MEG falls on weak demand; production costs rise

10 June 2009 17:09  [Source: ICIS news]

LONDON (ICIS news)--Prices of spot monoethylene glycol (MEG) in Europe are falling from highs of €440/tonne ($620/tonne) to €400-420/tonne, despite higher feedstock costs, due to weak demand, buyers and sellers said on Wednesday.

“Costs go up, prices go down. This is a bad move,” a producer said, echoing the sentiments of other manufacturers.

An offer of 2,000 tonnes of US MEG was valued at €400-415/tonne CIF (cost, insurance and freight) NWE (northwest Europe), depending on source.

The material, though, had yet to be shipped and other sellers did not consider the figures to be workable.

“[The price of] €400/tonne is just an idea. It doesn’t reflect [the market],” one source said, adding that this, and particularly €415/tonne, would be too high for a trader to risk bringing over material.

Some market sources also spoke of an Iranian cargo that could be arriving in Europe this month, but details were still unclear.

The price of ethylene (C2), MEG's raw material, went up by €20/tonne in June to €705/tonne FD (free delivered) NWE.

“I know C2 is rising on the back of naphtha, but natural gas prices in the US and Middle East are really low,” said a trader.

An initial June MEG contract settlement at €520/tonne FD NWE, a decrease of €10/tonne from May, was agreed between a producer and a consumer earlier this week.

Producers said they had been working on lifting the MEG contract price, with one aiming to increase it from €530/tonne to €545/tonne.

The targets to increase the value were based on C2 moving up and on Europe not being “rich in material”.

Poor market conditions had prompted significantly reduced operating rates in Europe to an estimated 55-60%, sources agreed.

“The spirit for an increase has been dampened by the first settlement, but we are yet to give up,” a producer insisted.

Other spot offers were heard in the region of €440/tonne FOB (free on board) NWE and €420/tonne CIF NWE, but bids were scarce.

“The CIF price is coming down based on demand,” a producer said.

($1 = €0.71)

For more on MEG visit ICIS chemical intelligence
Read Paul Hodges’ Chemicals and the Economy blog
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By: Caroline Howard
+44 20 8652 3214

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