13 March 2013 10:03 [Source: ICIS news]
LONDON (ICIS)--An initial European monoethylene glycol (MEG) March contract has been agreed at €1,070/tonne ($1,390/tonne), the buyer and seller involved said on Wednesday.
The agreement was a joint settlement with the February contract, which was confirmed at €1,105/tonne.
This is the latest in a string of combined settlements signalling the dissatisfaction buyers and sellers have with each other's price proposals. The initial February price was agreed as a dual settlement with the confirmed January price on 24 January. ($1 = €0.77)
Ethylene makes up 60% of a tonne of MEG, and high ethylene costs puts pressure on European MEG producers to increase prices.
Importers are not affected by European production costs and focus more on supporting a price that will attract material from other regions in order to support requirements in Europe, a net importer.
The dominant Asian price hikes were stifled in March with the introduction of a rollover from February's Asian contract price nomination of $1,310/tonne CFR (cost and freight) Asia.
A steady rise in Asian spot MEG before the Lunar New Year celebrations came to a lull during them, only to crash at the end of February following negative economic data. Lower Asian spot numbers are being taken into consideration, although this is being countered by the euro/US dollar exchange rate situation.
Buyers are seeking compensation in the March contract.
Demand and producers' margins for the downstream market, polyethylene terephthalate (PET), continue to be depressed, causing PET producers to reduce their output. It is this sector which has been the most vocal in its disagreement with February's MEG price increase.
Only in the past few weeks have PET sellers managed to adhere to their targets of lifting prices, thus managing to at least regain some composure where margins are concerned.
The contract settlements were done an a free delivered (FD) northwest Europe (NWE) basis.
($1 = €0.77)Mark Victory contributed to this article
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