Europe MEG price soars as buyers pay price for stalling

20 July 2012 18:07  [Source: ICIS news]

LONDON (ICIS)--Monoethylene glycol (MEG) spot prices have soared in Europe as buyers look for product in a dry market after months of inactivity, sources said on Friday.

"There are lots of requests for bulk cargoes and we don't have any," a producer said, echoing comments made by others.

A customer found the odd truck but he said, "bulk we can't get," despite being prepared to pay a high price.

The market has performed a u-turn in a matter of days. From lows in the mid €600s/tonne CIF (cost, insurance and freight) NWE (northwest Europe) bulk spot offers are now talked around €800/tonne ($988/tonne).

"The market turns around 180 degrees and the market [price] shoots up," according to a trader.

Buyers came into the market once prices had bottomed out at €655/tonne, according to data from ICIS.

Due to the lack of demand prior to July, glycol production had been turned down, prices dropped and imports failed to materialise, so a return to business took the market by surprise.

It remains to be seen how long the market and the demand therein can support the huge price jumps seen in recent days.

"I don't think demand is strong. I don't think demand has fundamentally changed," a trader said.

The lack of demand for MEG resulted in reduced output and this impacted by-products diethylene glycol (DEG) and triethylene glycol (TEG) which were described as balanced-to-tight or tight, depending on source.

"We are completely sold out of DEG for July. It looks very, very tight," a supplier said.

The TEG market was even more dramatic as prices were talked up to €1,500/tonne FCA (free carrier) NEW, compared with the €1,300/tonne that was present only a matter of weeks ago.

"TEG is exploding price wise. Nobody has TEG," according to a seller.

Spiking prices are not necessarily signs of a healthy market and some players see the situation as overheated and expect to see demand, as well as prices, decrease again in August.

"It is not healthy when prices go up so quickly," a second trader said. He added that with all the uncertainty surrounding the current glycol and general economic situation, it was important for the European market to regain trust from the industry, and steep price increases would do little to help.

($1 = €0.81)

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By: Caroline Murray
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