20 September 2012 10:21 [Source: ICIS news]
Correction: In the ICIS story headlined "European September MEG contract fully confirmed at €1,075/tonne" dated 20 September 2012, please read in the seventh paragraph ...Discussions dropped below $1,100/tonne... instead of ...Discussions dropped below €1,100/tonne... A corrected story follows.
LONDON (ICIS)--The European September monoethylene glycol (MEG) contract price has been fully agreed at €1,075/tonne ($1,396/tonne), up €100/tonne compared with August, the buyer confirmed on Thursday.
The seller informed ICIS late on Wednesday that it had followed the initial agreement that the first two parties had concluded on 7 September.
Discussions had been difficult because buyers’ and sellers’ price ideas were so far apart, as they have been for much of the year.
Customers had been seeking around €1,050/tonne FD (free delivered) NWE (northwest Europe) for September, but a few acknowledged that higher would be acceptable, partly in view of increased production costs.
Producers were vying for over €1,100/tonne which they said would reflect the tight market conditions and the rising cost of MEG in the dominant Asian arena.
As a net importer, Europe needs to attract imports and Asian prices have been spiking. On Friday, 14 September, spot prices surged to an 11-month high, driven by the US stimulus package, and offers were at $1,150-1,160/tonne CFR (cost and freight) China Main Port (CMP).
Discussions dropped below $1,100/tonne on Thursday, however, prompted by a loss in crude oil futures.
Production costs also continued to surge and Europe ethylene contracts rose by €125/tonne from August to September, peaking at €1,300/tonne FD NWE.
European spot prices rose from the mid-€600s/tonne CIF (cost, insurance and freight) NWE in July, into the €900s/tonne in September.
There had been concerns that the September contract would eventually be settled together with an initial October price, as per August and September.
This method usually incorporates compromises that would not normally feature when contracts are settled for a month at a time, and it is not popular with the industry.
Uncertainty is never good for the market, sources agreed.
$1 = €0.77
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