Europe buyers target decrease for May MEG contract

10 May 2013 17:30  [Source: ICIS news]

LONDON (ICIS)--European buyers are targeting a decrease for the May monoethylene glycol (MEG) contract price on the basis of lower spot prices and supply/demand dynamics in Europe, as well as dissatisfaction over the drop in prices from March to April, sources said on Friday.

"A €70/tonne ($91/tonne) decrease makes sense because it's compensation for April. Because last month it just reduced by €50/tonne and should have been €110/tonne," a buyer said.

Anything from a rollover to minus €10/tonne, €30-50/tonne and €70/tonne were mooted, but negotiations are in their initial stages.

"I don't believe it will be a rollover. There is no improvement of demand on the PET [polyethylene terephthalate] side. The impact of [interest from buyers of] antifreeze will be rather limited in the end. As soon as they buy, they are covered until the end of June," a reseller said.

He added that despite shutdowns in Europe, producers were not necessarily short, because of poor sales.

Demand from PET and the coolant sectors, although a little better, has yet to prove itself as having turned a corner. This is making people nervous, as they try to gauge what will happen next.

Suppliers did not go into detail regarding their expectations but pointed out that the aim was to reflect the market.

"We will look for a solution that represents the supply/demand situation in Europe and the Asian market developments during month of April," a supplier said.

A producer acknowledged that a decrease may be on the cards, particularly when taking into account the weaker spot market, but that discussions had not really begun.

"Customers say and hope for a decrease," he said.

The April contract price was settled at €1,020/tonne FD (free delivered) NWE (northwest Europe), down by €50/tonne compared with March.

($1 = €0.77)

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By: Caroline Murray
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