Europe MEG softens despite global supply difficulties

28 September 2012 18:25  [Source: ICIS news]

LONDON (ICIS)--European monoethylene glycol (MEG) spot prices are softening despite continued supply difficulties around the world, sources said on Friday.

"We have had to reduce [truck prices] a bit because €1,020-1,040/tonne ($1,325-1,351/tonne) is not achievable and €980-1,000/tonne is realistic," a producer said about the free carrier (FCA) northwest Europe (NWE) market.

Echoing comments made by other players, he added that product is more readily available, following the restart of several European manufacturing sites.

"It seems to be longer now and demand is rubbish," a trader said.

Prices have softened for the first time in two and a half months, following a rapid hike that brought bulk prices up from the €600s/tonne into the mid €900s/tonne CIF (cost, insurance and freight).

Although prices have come off this week, they have not dropped by much and remain relatively firm.

Global tightness has supported continued strength in the price of MEG. There have been production problems in Asia and the Middle East, alongside a spate of European shutdowns. 

Other than a blip in July when prices bottomed out causing a rush into the market, there has been no evidence of customers bulking up on stocks prior to the winter antifreeze season.

"We don't see demand is enough to put thousands of tonnes in stock," a coolant player said.

Downstream polyethylene terephthalate (PET) producers are understood to be taking their contracted MEG volumes but have not been heard in the spot market. The PET bottle season is over, and overall, demand for PET is disappointing. Customers are buying cautiously which is resulting in growing inventories at PET manufacturers' sites, buyers and sellers said.

Thanks to nervousness among buyers now and uncertainty as to what lies ahead, there is a possibility that customers may enter the market all at once, thereby shorting it and causing prices to rise once more.

"Everyone is waiting until they all need to buy and if they continue to wait because they think prices are going to go down, they may get a slightly better price but find that there are only two instead of 20 trucks available," a trader speculated.

Upstream, the European October ethylene contract price was agreed on at €1,290/tonne FD NWE, down by €10/tonne compared with September. MEG contract discussions are yet to get fully underway. September MEG was agreed at €1,075/tonne FD NWE. 

($1 = €0.77)

By: Caroline Murray
44208 652 3214

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