MEG weakness leads to tight, expensive DEG market in Europe

15 June 2012 18:12  [Source: ICIS news]

LONDON (ICIS)--Continued weakness in the European monoethylene glycol (MEG) market is leading to a tight and firm situation on by-product diethylene glycol (DEG), sources said on Friday.

"Many producers reduced the MEG rate and this affects DEG. It causes a reduction of DEG," a producer said.

As MEG contract prices drop 14% from March to June and spot values plummet from the €900s/tonne ($1,139/tonne) CIF (cost, insurance and freight) Rotterdam in March to either side of €750/tonne by Friday, bulk DEG prices jumped by over €100/tonne in under a month.

Spot DEG ideas are now in the €800s/tonne CIF ARA (Antwerp, Rotterdam, Amsterdam), according to ICIS.

A trader attributed the fast upward price trend to a lack of supplies as well as a modest pick-up in demand.

"It is going up in steps of €5-10/tonne and it has gone up €100/tonne in a month," the trader said.

"In the past three weeks I have tried to buy [DEG] everywhere," a customer said. It added that having rejected an offer at €930/tonne, using glycerine instead of DEG was its only option.

A second supplier said that the DEG market is 'booming' but said that it is more about a lack of availability rather than demand picking up to a great extent.

Although it did add that; "UPR [unsaturated polyester resins] is running very well because of the season".

MEG on the other hand, is doing quite the opposite.

"[The MEG market] is so quiet because everyone expects prices to decline further. They are reluctant to fill their tanks. Well, they already have full tanks," the first producer said.

Downstream from MEG, polyethylene terephthalate (PET) has not performed anywhere near as well as it is expected to do in the summer season. A combination of poor weather and the unhealthy economic environment has put buyers off stocking up.

"If demand [for PET] is not present in the high season and raw material [prices] are dropping, PET pricing can only go one way," a customer said, echoing comments made by others.

Meanwhile, upstream ethylene is long and demand is fragile. Market sources suggest that a decrease of €80-150/tonne could be seen in July on the back of weaker feedstock naphtha, as well as the long supply and demand balance. The June contract settled at €1,205/tonne FD NWE.

($1 = €0.79)

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By: Caroline Murray
44208 652 3214

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