Price ideas in Europe June MEG contract discussions vary widely

27 May 2010 17:56  [Source: ICIS news]

LONDON (ICIS news)--Price ideas being discussed in the European June monoethylene glycol (MEG) contract vary significantly as buyers look to emulate the drop in Asian values and sellers cite tight supply as a reason to increase prices, sources said on Thursday.

“There is not enough product for the extremely good demand,” said a supplier, who was looking for a €9/tonne ($11/tonne) increase from May’s contract price of €856/tonne.

The supplier insisted that a heavy shutdown schedule for MEG and upstream ethylene oxide (EO) during the traditional peak season for downstream polyethylene terephthalate (PET) supported the argument for higher prices in June.

“PET [producers] are passing more increases than the raw materials, so why should we drop our prices?” the supplier asked.

PET values have been consistently strong since the fourth quarter, largely because of a lack of domestic availability. The imports that were covering domestic shortages have since become uncompetitive because of less-favourable exchange rates.

There were reports of PET price ideas beginning to slip, however, because of bad weather and downward pressure from Asia.

A buyer who is also a regular MEG contract settler said it was vying for June contracts to settle around €800/tonne FD (free delivered) NWE (northwest Europe).

“We have to compete with MEG in Asia...[A price range of €790-810/tonne] is being very gentle to [producers],” it said.

Asian MEG prices fell below the psychological barrier of $750/tonne CFR (cost and freight) CMP (China Main Port) this week as a result of plunging crude values and severe oversupply in China.

If the current situation in the European MEG market depended solely on what was happening in China, prices would crash, according to a trader.

The trader said the situation was stabilised by the exchange rate and a tight prompt market, at least for the first half of June. 

The second half of June would produce more MEG imports and a weaker PET market, some players speculated.

Contract discussions remain ongoing.

($1 = €0.82)

For more on MEG and PET, visit ICIS chemical intelligence
To discuss issues facing the chemical industry go to ICIS connect

By: Caroline Murray
44208 652 3214

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