EPCA '12: Europe October MEG contract talks at loggerheads

07 October 2012 09:43  [Source: ICIS news]

BUDAPEST (ICIS)--European monoethylene glycol (MEG) contract price discussions are already proving difficult as buyers seeking a decrease strongly disagree with sellers' targets for an increase, sources said on Sunday.

"I see €1,100/tonne plus based on the situation of the past week in the European spot market and the firm prices in Asia. There could be no other option," a producer said on the sidelines of the 46th annual European Petrochemical Association (EPCA) meeting.

He added that rising costs would also feature in arguments for an increase.

A second seller is looking for a price above €1,100/tonne FD (free delivered) NWE (northwest Europe). A third said €1,100-1,125/tonne was essential to recover lost margins and to reflect global balances. He added that he had been trying to convince customers for the last two months that the price should be over €1,100/tonne.

"Based on the August/September discussions we need to recover €40-50/tonne," according to the third seller.

Customers acknowledge that there has been a degree of tightness in the market but point out that most domestic producers are now back on stream. The US is very tight and production outages in the Middle East and Asia are affecting what importers have at their disposal.

Two producers agreed that the market was more balanced now, but there was still no immediate need to offload material.

"Demand in general is not that bullish..There is no need to buy or sell [spot]…I'm not long at all," one of the producers said.

Sellers see downstream polyethylene terephthalate (PET) contractual off take as normal for the time of year, this being the end of the peak season.

"The [PET bottling] season is over. We don't need a lot of quantities, just normal volumes," a PET buyer agreed.

Other sources see demand for PET as lower than expected, and 'disastrous' was how one PET player described the situation.

Requirements for MEG into coolants have not resurfaced, and while some players expect to see demand improve over the coming weeks, others say this is unlikely because end user enquiries have been low.

"Antifreeze demand is poor. The cold weather may generate extra activity…Automotive is a big driving factor," a reseller of MEG said, adding that buyers of antifreeze products have not yet called off volumes. 

As Europe is a net importer, Asia is the dominant market and has a strong hold over European contract discussions, however, different players use different Asian prices as reference points.

Thus, both sides use Asian prices in their arguments but for some buyers this forms part of the reason to drop prices and for some sellers it supports their target for higher prices.

October MEG Asian Contract Price (ACP) nominations were recorded at $1,230/tonne CFR (cost and freight) Asia, $1,250/tonne and $1,270/tonne, an increase from the previous month.

The European September contract price was agreed at €1,075/tonne.

The annual EPCA meeting runs from 6-10 October.

($1 = €0.77)

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By: Caroline Murray
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