Increase likely for European August MEG contract price

02 August 2012 14:12  [Source: ICIS news]

LONDON (ICIS)--The European August monoethylene glycol (MEG) contract price is likely to increase because of poor availability and higher production costs, buyers and sellers said on Thursday.

There could be some increase, a buyer said, adding that a seller's proposal of more than €1,000/tonne ($1,220/tonne) FD (free delivered) NWE (northwest Europe) was not realistic.

A second buyer agreed and said it was after compensation for the relatively small decrease that emerged in July.

“[This year] MEG went up and ethylene went down and vice-versa but more of the latter, so we lost big margins compared to previous years, a producer said.

Feedstock ethylene plummeted by €170/tonne from June to July, only to regain €140/tonne in August with a settlement at €1,175/tonne.

In July, MEG contract prices dropped by €40/tonne to €885/tonne.

A figure well above €1,000/tonne is what a second MEG seller is targeting for August. Justification for this move includes very strong demand from antifreeze, polyethylene terephthalate (PET) and distribution, the very limited supply in Europe and a strong market in Asia.

Following months of depressed demand, the European market was suddenly inundated in July with buyers coming back into the market.

We are sold out already. We were prior to the month starting…A lot of people do not have much product, the producer said.

Spot prices in Asia surged to $960–965/tonne CFR (cost & freight) China Main Port this week, prompted by an unexpected six-week outage at EQUATE in Shuaiba, Kuwait. During August and September, there are further shutdowns planned in the Middle East and Europe, which could affect availability in Europe.

We are in for a significant increase, I believe, the producer said. 

($1 = €0.82)

By: Caroline Murray
44208 652 3214

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