Divisions over initial Europe August MEG contract agreement

04 August 2011 14:40  [Source: ICIS news]

LONDON (ICIS)--European players are divided over the initial August monoethylene glycol (MEG) contract price of €1,048/tonne ($1,497/tonne), up €4/tonne from July, buyers and sellers said on Thursday.

“The price is ridiculously low… At the moment there is a lot of reluctance from sellers,” said a producer.

Customers acknowledge that initial thoughts of a rollover or a decrease for August contracts are no longer valid in view of firming Asian prices and the US dollar-euro exchange rate.

The Asian price is normally a key factor in European contract discussions. Major producers nominated decreases for August contracts of $50–60/tonne to $1,300–1,320/tonne CFR (cost and freight) Asia. Spot prices have since risen steeply.

“The €1,048/tonne is a compromise even if producers wanted a two-digit increase of €10–15/tonne,” said a customer.

He added that one seller had proposed more than this.

The price of €1,048/tonne “is neither here nor there”, said the customer.

“We were looking for an increase of around €50/tonne,” said a second producer.

A second buyer said on 1 August that it was likely to follow the initial settlement because the number was “logical”. As yet, this has not happened.

“Customers’ arguments are getting thinner because European spot is firming,” said the first producer.

A seller reported having sold 1,000 tonnes of MEG for second-half of August delivery to the antifreeze sector at €935/tonne FOB (free on board) Antwerp. He equated this to €945/tonne CIF (cost, insurance and freight) NWE (northwest Europe), up from earlier deals at €918–935/tonne, according to data from ICIS.

While requirements for downstream polyethylene terephthalate (PET) have seen a dip, demand from the antifreeze market is beginning to kick in.

The second producer described customers’ interest for spot as “very big” and attributed this to them having held back in expectation of a price fall and nervousness caused by problems at Formosa’s Mailiao complex in Taiwan.

“The antifreeze season has started,” he added.

At this stage, most buyers and sellers are refraining from following the initial settlement, which was made on 1 August on a free delivered (FD) northwest Europe (NWE) basis.

The European July MEG contract price was agreed at €1,044/tonne FD (free delivered) NWE (northwest Europe), up €29/tonne from June.  

($1 = €0.70)

For more on MEG, PET visit ICIS chemical intelligence
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By: Caroline Murray
44208 652 3214



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