Initial Europe July MEG contract fails to find support

13 July 2012 16:20  [Source: ICIS news]

LONDON (ICIS)--The initial monoethylene glycol (MEG) July contract settlement at €885/tonne ($1,079/tonne) has so far failed to find support from other buyers and sellers, sources said on Friday.

"We have one settlement and the second one is still missing," a producer said.

Most sellers are trying to agree on a figure as close to a rollover as possible and consider the €40/tonne drop from June's €925/tonne FD (free delivered) NWE (northwest Europe) unacceptable.

"We have big concerns that Europe will not have good returns compared to other markets," a supplier said, referring to the fact that Europe is a net importer of product.

The supplier added that current exchange rates and higher prices in the dominant Asian market make the initial settlement even more out of line with where it should be.

Buyers are equally disillusioned with the initial contract settlement.

"The falls in ethylene suggests that the reduction should have been greater," a buyer said.

Meanwhile, the spot MEG market is moving up as demand from antifreeze buyers kicks in.

"Antifreeze customers are looking desperately for low-priced MEG to fill up their stocks,” according to the producer.

All discussions now are above €700/tonne FOB (free on board), and increasing, with the latest deal confirmed at €732.50/tonne CIF (cost, insurance and freight) NWE.

“Apparently sentiment has changed," another seller said, echoing comments made by others.

Upstream looks stronger too. A combination of reduced cracker rates and firm upstream prices has contributed to a tighter ethylene supply and demand balance and limited spot availability.

Contract discussions continue.

($1 = €0.82)

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By: Caroline Murray
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