Huge discrepancy in price ideas for Europe June MEG contract

01 June 2012 12:22  [Source: ICIS news]

LONDON (ICIS)--There is a huge discrepancy in price ideas for the European June monoethylene glycol (MEG) contract price, sources said on Friday.

A supplier intends targeting an increase of over €20/tonne ($25/tonne) while customers are talking about decreases of around €80/tonne.

"We are looking for an increase to reflect the exchange rate…The target is over €1,000/tonne," a supplier said.

This would be up from May's contract price of €979/tonne FD (free delivered) NWE (northwest Europe).

The supplier argued that on average, prices in the dominant Asian market increased from April to May. The supplier normally uses retrospective pricing when deciding on a target for the current month.

June Asian contract prices are up by $30-50/tonne and are listed as $1,150/tonne CFR (cost and freight) Asia, $1,200/tonne and $1,170/tonne.

Initial comments from European contract customers indicate a resolve to push MEG prices down to €900/tonne or possibly €930-960/tonne.

"Parity with Asia and the average for May was $965/tonne; [weakening] spot in Europe and low market demand," is sufficient justification for a decrease, according to a customer.

European spot has been coming off since March, according to data from ICIS.

The June MEG contract price should at least reflect a passthrough of the €120/tonne decrease in upstream ethylene to €1,205/tonne FD NWE in June, particularly when demand is so slack, said a second customer vying to get below €900/tonne for June MEG.

"A huge decrease in ethylene leads to a huge decrease in MEG," a third buyer agreed.

The market is balanced, largely because of curtailed availability globally as opposed to improved demand.

Contract discussions have yet to get underway and a clearer picture is expected to emerge next week.

($1 = €0.81)

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