Timely Europe April MEG contract discussions point to a decrease

28 March 2013 15:26  [Source: ICIS news]

LONDON (ICIS)--April monoethylene glycol (MEG) European contract price discussions have begun on a bearish note following decreases upstream and in the MEG spot market, sources said on Thursday.

"I see prices going down for April on the European contract price, the question is clearly to what magnitude," a producer said.

April ethylene, the main MEG feedstock, decreased by €60/tonne ($77/tonne) to €1,265/tonne FD (free delivered) NWE (northwest Europe), pulling MEG production costs down.

MEG producers, however, are keen to protect margins and are unlikely to agree to the full ethylene decrease.

Asia, the dominant market, saw spot prices drop below $1,000/tonne CFR (cost and freight) China Main Port (CMP) for the first time since August 2012.     

Asian contract nominations also fell by $100-150/tonne from March to April, offering an insight into the direction prices are likely to take in Europe.

"Asia is very weak, the April contract price is down, spot is below $1,000/tonne and exchange rates are stable," a buyer said, adding that a €50/tonne decrease on April MEG contracts would be the minimum it would expect to see.

Europe's spot decreases have been less dramatic than those in Asia. While demand in Europe is sluggish, the onset of scheduled shutdowns and the lack of imports make for a more balanced situation.

Average spot prices are similar to where they were at the beginning of the year.

The March contract price was agreed at €1,070/tonne FD NWE.

Following months of protracted discussions, an early start to talks is a positive move that will hopefully become the norm, the producer said.

"We have started with discussions. We agreed that as soon as ethylene settles we would start, to avoid getting into lengthy discussions," he added.

Others are yet to follow suit.

($1 = €0.78)

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By: Caroline Murray
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