MEG spot prices soar in tight Europe market

06 January 2010 16:31  [Source: ICIS news]

LONDON (ICIS news)--The value of monoethylene glycol (MEG) in Europe is increasing daily because of production difficulties around the globe, sources said on Wednesday.

"There are more reasons for prices to go up than to go down," according to a producer.

On hearing of a possible transaction at €685/tonne ($979/tonne) CIF (cost, insurance and freight) NWE (northwest Europe), a buyer said this was indeed the sort of number it had been facing.

"I will be very happy to find the product," the buyer said.

Spot was valued in the mid-to-high €500s/tonne before the Christmas break, according to data from global chemical market intelligence service ICIS pricing.

The truck market was struggling to keep up as offers of €700-750/tonne FCA (free carrier) Rotterdam were heard alongside others in the €600s/tonne, traders said.

These levels were up from €560-590/tonne in December.

"I didn't expect such a dramatic increase," a producer said.

Most players returned to their desks in the week beginning 4 January. Few actually bought material, astounded as they were by the offers on the table. Most, in the truck market at least, were clamouring for cheaper product, but to no avail.

"I have hit the breaks now and we are not selling. We are waiting for a clearer picture," the producer added.

A combination of production-related problems was causing prices to rise continuously, sources agreed.

Two plants were down in the Middle East, and contract deliveries had been reduced to an absolute minimum, according to European players.

Prices in Asia shot up from around $900/tonne FOB (free on board) Asia at the end of 2009, to offers of $1,050/tonne on Wednesday, they said. Asia is the prime market for Middle Eastern suppliers.

"It would be crazy to bring [material] to Europe [from the Middle East] and if European producers cannot produce more, then it's very worrying," the buyer added.

A fire at BASF's Antwerp cracker in Belgium and another at Ludwigshafen three days later had affected MEG availability, a source at BASF said, echoing the thoughts of others.

In addition, demand for antifreeze was healthy because of the cold spell that was sweeping across Europe, players agreed.

($1 = €0.70)

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By: Caroline Howard
+44 20 8652 3214

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