19 November 2009 12:13 [Source: ICIS news]
SINGAPORE (ICIS news)--Asian monoethylene glycol (MEG) spot values have unexpectedly risen by around 5.5% over the past four days, leaving some market sources to deem the price movement illogical, they said on Thursday.
MEG spot values were assessed at $815-825/tonne (€546-€553/tonne) CFR (cost and freight) CMP (China Main Port) at the close of trading on Thursday, up $40-50/tonne from the 16 November price of $775-780/tonne CFR CMP, according to global chemical market intelligence service ICIS pricing.
A major Taiwanese producer, who sold spot lots at $815/tonne CFR CMP, said it was unsure of the impetus behind the uptrend.
“I have been calling all our customers to check if there are any other sudden outages or any major shipment delays, but there are none. The inventories at all the major Chinese ports may not be very high, but neither are they extremely low,” the producer said in Mandarin.
While some market observers said recent increases in upstream and energy values could have pushed prices up, other sources disagreed.
“Crude has been strong this week, but MEG is not going up because of any cost push. The strength in crude is just a major indicator that the US dollar is weakening, and that is why people are buying up MEG: as a hedge against inflation,” said a source from a major regional trader in Mandarin.
Crude futures hovered just under $80/bbl and naphtha traded in the low $700s/tonne CFR ?xml:namespace>
Most market players said new MEG capacities started up in the Middle East last quarter, totalling over 2m tonnes/year, which has resulted in an oversupply of cargoes.
Sources said they expected demand-supply fundamentals to continue to weaken with the recent start-up of Shell Chemicals’ 750,000 tonne/year MEG facility in Singapore.
On the other hand, several traders and end-users said the current surge was caused by speculation, rather than market fundamentals.
“Demand-supply? Nobody is looking at demand-supply fundamentals today. LCs (letters of credit) are cheap and readily available, so why not just take a gamble and buy some cargo?” said a Taiwan-based trader.
A Singapore-based trader said expectations of a harsher winter in
"The short-term outlook is going to be very hard to read. While inventories at end-users and producers are not likely to be high, traders should have some stock, which they are just not ready to release yet," the trader said.
Market players pointed out that any continuation of such a price trend could quickly open up the west-east arbitrage window and attract deep-sea cargoes into
($1 = €0.67)
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