Players far apart in Europe MEG March contract discussions

07 March 2012 16:17  [Source: ICIS news]

LONDON (ICIS)--European March monoethylene glycol (MEG) contract discussions are underway but buyers and sellers have very different ideas as to where the price should settle, sources said on Wednesday.

"Discussions are not moving in any direction so far," a seller said.

Suppliers are targeting hikes based on the demand/supply situation in Europe - a net importer which has failed to attract imports.

"We would like to ensure internally that we can justify imports to Europe and that our customers remain competitive," the seller added.

Factors including production problems upstream and ethylene glycol maintenance shutdowns due in Europe just as the traditional downstream polyethylene terephthalate (PET) bottling season kicks in, all point to the need for more MEG, sellers said.

The price of the European March ethylene contract, which rose by €86/tonne from February to €1,305/tonne ($1,717/tonne) FD (free delivered) NWE (northwest Europe), also features as a reason to increase MEG prices.

The February MEG contract was agreed at €1,065/tonne, which both buyers and sellers are unhappy with for different reasons. Both sides cite the February MEG contract settlement as a reason to strengthen their arguments for the March contract price.

One buyer looking for a rollover said it had received offers of over €1,100/tonne, adding that another buyer was bidding €1,030/tonne. An increase of €20/tonne was also on the table, he said.

Sellers did not specify their targets this week though a second seller did say that a rollover would be "poison for our margin".

"As long as suppliers are asking for an increase, I will ask for a decrease," a second buyer said.

Both buyers acknowledge that production costs have gone up but that parity with Asia and the European spot situation requires a less bullish stance in European contract discussions. Exchange rates play a major role because of this and players are waiting to see where they lead while watching for developments in Asia.

A prompt spot deal for 2,000 tonnes was confirmed on Wednesday at €890/tonne FOB (free on board) NWE, in line with recent bids and offers. Asian spot is just under $1,100/tonne CFR (cost and freight) China main port, while Asian March contract nominations either rolled over or slipped by $20/tonne to $1,220/tonne. 

($1 = €0.76)

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By: Caroline Murray
44208 652 3214

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