Europe May MEG price likely to fall on downward pressure in Asia

26 April 2011 16:59  [Source: ICIS news]

LONDON (ICIS)--The European May monoethylene glycol (MEG) contract price is likely to decrease from April's  €1,100/tonne ($1,594/tonne) because of downward pressure on prices in Asia, buyers and sellers said on Tuesday.

“There will be a decrease of course. The question is how much,” a customer said.

There have been no concrete price proposals for May officially put on the negotiating table, and there may not be until 28-29 April or even early May, industry players agreed.

Earlier there had been suggestions that customers were anticipating decreases of up to €150/tonne over May, June and July.

Players in the European market, which is a net importer currently benefiting from a stronger euro against the US dollar, are keeping a close eye on polyester demand and price developments in Asia.

Asian MEG contract price nominations for May were announced at $1,250/tonne, $1,280/tonne and $1,300/tonne CFR (cost and freight) Asia. These were $100/tonne, $120/tonne and $100/tonne lower, respectively, than in April.

On Tuesday, Asian spot prices of purified terephthalic acid (PTA), which along with MEG feeds into polyester and polyethylene terephthalate (PET), dropped by $100/tonne over the course of one week to $1,290–1,300/tonne CFR China.

Sources in Asia attributed the price fall to panic-buying caused by the restarts at major Asian PTA plants, lower demand in India and weaker PTA futures.

PTA in Europe has remained tight because of production difficulties during the first half of 2011. Prices are traditionally influenced by what happens with upstream paraxylene (PX) and its pricing in Asia, which is currently showing signs of weakening because of a lack of demand.

There is sufficient MEG in Europe to satisfy demand, according to sources. This is partly because of the tight PTA market affecting PET availability in Europe.

“Demand [for PET] in Europe is very good. The peak season is coming,” a second MEG buyer said.

An MEG producer said that while it is not concerned that material could flood into Europe, it acknowledged that an element of easing in the May price is justified because of what is happening in Asia.

Producers and a buyer said they are anticipating a slight decrease in May prices, rather than a freefall, partly because of the continued strength of raw material costs.

The April European MEG contract price was settled on a free delivered (FD) northwest Europe (NWE) basis.

($1 = €0.69)

For more on MEG, PTA, PX and PET, visit ICIS chemical intelligence
Read John Richardson and Malini Hariharan’s Asian Chemical Connections blog

By: Caroline Murray
44208 652 3214

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