Europe Jan MEG expected to rise on tight supply, ethylene hike

24 December 2010 09:03  [Source: ICIS news]

ALICANTE, Spain (ICIS)--January monoethylene glycol (MEG) contract prices were expected to increase as early discussions centered on tight supply and bullish upstream ethylene developments, buyers and sellers said on Friday.

“I worry the increase will be more than €70/tonne ($92/tonne), that it will be between €70-100/tonne,” a customer said.

Following Wednesday’s ethylene settlement for January at €1,110/tonne FD (free delivered) NWE, up €105/tonne from December, an MEG producer’s recent plan to implement increases of €70/tonne on the December price of €975/tonne FD NWE was rejected as too low by another contract supplier.

“[The ethylene increase] is impressive and inspiring. The fundamentals are there for a significant increase,” a supplier said.

Customers saw a January increase as inevitable. One major buyer said it was banking on €1,000/tonne initially but that this estimate had gone up to €1,020-1,030/tonne. Another buyer was concerned that the initial target of plus €70/tonne would increase because of the new ethylene contract price.

The market was finely balanced, according to some market sources, but the majority said supply was tight.

“On the supply/demand side January looks a bit limited on supply from the big producers,” said a trader.

Buyers and sellers were expecting a bullish start to the New Year as producers prepared for a spate of turnarounds and there seemed to be no easing of requirements for anti-freeze applications.

“It is the first time we have had this kind of weather for 15 years… Anti-freeze demand is huge,” a blender said. 

There are much-needed imports on the way and while it remains unclear how much of the product on board is unsold, players did not expect a long market to ensue, at least not in the short term.

Were the weather to change, however, demand would drop off fast.

“If the weather changes and becomes very mild, buyers just won’t take [MEG]. They don’t want to be left with lots of high-priced glycol,” the blender said.

($1 = €0.76)

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By: Caroline Murray
44208 652 3214

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