Europe April MEG contract talks prove difficult to start

03 April 2012 11:09  [Source: ICIS news]

LONDON (ICIS)--European monoethylene glycol (MEG) April contract discussions are proving difficult to start because of rising production costs versus falling Asian prices, sources said on Tuesday.

"We are not getting anywhere in discussions, so it is a bit of a wait-and-see situation," said a supplier. It added that sellers need to recuperate what they lost in March when MEG settled up by €5/tonne ($7/tonne) at €1,070/tonne FD (free delivered) NWE (northwest Europe), while ethylene increased by €86/tonne.

The price of upstream ethylene went up by €40/tonne in April, to €1,345/tonne FD NWE, putting pressure on MEG to increase by €25/tonne.

This factor, plus a conversion of the European bulk spot price from cost, insurance and freight (CIF) to FD, "point to at least a stable picture", said a second supplier.

Spot prices were last recorded at €860–885/tonne CIF NWE and €880–910/tonne FCA (free carrier) Rotterdam, according to ICIS.

Some much lower offers, including at about €800/tonne CIF NWE, are beginning to emerge for product set to arrive during the second half of April, according to sources.

"There is no doubt that the [contract] price has to drop significantly," said a customer, echoing comments made by other buyers.

"It is very complicated. Spot is below $1,000/tonne CFR [cost and freight] Asia… and the [downstream] PET [polyethylene terephthalate] market is not performing well," said the customer, adding that exchange rates were not in suppliers' favour.

Discussions are expected to be tough.

($1 = €0.75)

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