24 June 2011 19:56 [Source: ICIS news]
LONDON (ICIS)--European monoethylene glycol (MEG) buyers are steering clear of the bulk spot market after prices made a u-turn and jumped up by around €100/tonne ($143/tonne), sources said on Friday.
“We had a lot of interest from antifreeze buyers when prices were €820-850/tonne. Once we started talking to the big antifreeze buyers about prices based on the €900/tonne, they walked away,” a blender said.
In May, spot bulk prices dropped rapidly into the low €800s/tonne CIF (cost, insurance and freight) NWE (northwest Europe) as customers held back in anticipation of yet further weakening.
“It seems the dip at the end of May which was heavily delayed compared to Asia, very quickly had to recover,” a supplier surmised.
A fire at Formosa group's Mailiao petrochemical complex on 12 May brought its major MEG plant in Mailiao, Taiwan down in May, and this spurred panic across the globe.
The market became and still is almost impossible to read as mixed messages emerge about the extent of production losses from Nan Ya Plastics.
“It is not easy to read this market these days,” a trader said, echoing comments made by many other players.
Panic turned into silence this week, as players stepped back, questioning the sustainability of the current spot price offers over €900/tonne.
“It is only a matter of time that MEG comes down, too. We require a sign from Taiwan in order to bring market in Europe to a more bearish situation,” a trader speculated.
This situation has marred the way for clarity in July contract negotiations. Buyers and sellers are now far apart in their ideas of what should happen.
“I will not be surprised if we do not have a [July] contract price until the end of the month,” a buyer said.
Suppliers say that a firm market in Asia and the demand/supply balance in Europe justify an increase from June’s €1,015/tonne FD (free delivered) NWE.
Decreasing production costs will not necessarily mean that producers are able to pump out more MEG, one supplier added.
“There is not much room to run plants harder,” it said.
Some on the buy side still anticipate a rise in contract values but say the increase should be scaled back compared with initial ideas.
“With all I hear about ethylene being so weak, I guess the increase will be more limited than [we] thought earlier,” a customer said.
Buyers cite lower upstream ethylene prices and weakening prices along the chain, as well as sufficient MEG availability in Europe as reasons to push for a decrease. One customer expects producers will target an increase in order to achieve a rollover.
($1 = €0.70)
For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.
Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.
|ICIS news FREE TRIAL|
|Get access to breaking chemical news as it happens.|
|ICIS Global Petrochemical Index (IPEX)|
|ICIS Global Petrochemical Index (IPEX). Download the free tabular data and a chart of the historical index|
Asian Chemical Connections