Price and market trends: Europe MEG spot price begins to trend upwards

26 July 2013 08:43  [Source: ICB]

Bullishness on ethylene and reliance on domestic material during shutdowns support prices

The price of spot monoethylene glycol (MEG) in Europe has been relatively flat for weeks, but seems to have turned a corner and is increasing, sources said on 19 July.

"I have the impression that the market has completely changed because for the past six or seven days, there have been a number of questions for additional product and spot purchases," a producer said.

 Prices for MEG - used in antifreeze - may be warming up

Copyright: Rex Features

Bulk prices have since surpassed €800/tonne for the first time since early May. They hovered between €765-800/tonne ($1,007-1,053/tonne) CIF (cost, insurance and freight) NWE (northwest Europe) T2 for most of May, June and the first half of July.

Some players are now talking about levels just over €800/tonne, although just below also still exists.

"Everyone is talking the price up, that's for sure," a buyer said.

Bullishness in upstream ethylene and considerable reliance on domestic material during shutdowns, as well as contracted imports, are supporting the idea of a price increase.

"It's very clear that there is zero liquidity below €800/tonne and that sellers are fully anticipating some significant upside based on a higher August contract price," according to a trader.

Truck prices have not followed the uptrend quite yet. Free carrier (FCA) NWE full truck loads have varied only slightly within a range of €790-820/tonne since early May.

Offers are already out at €830-840/tonne, but success at this level is so far limited.

"For August I'm expecting price increases," a second producer said, echoing comments made by other buyers and sellers.

LATE SUMMER STRUGGLES
It has been a tough peak season for the downstream polyethylene terephthalate (PET) industry. A late summer and economic malaise put negative pressure on sales volumes, which have only recently started to pick up.

However, demand for MEG into antifreeze is much improved compared with recent months when the market was in the doldrums.

"The spot request level is still firm on bulk and truck," according to a third seller.

The MEG industry has been running on relatively low inventories because the market has been bearish and flat.

Availability is balanced-to-tight, according to buyers and sellers. Recent and forthcoming scheduled shutdowns, as well as unplanned outages, compound the situation.

Europe is a net importer and imports have been scarce up until now.

"When we looked for material, European availability is not really there. People are pretty sold out and if [they] sell more look for [higher] prices," a buyer from the coolant sector said recently.

While bulk price ideas are concentrated around the top of previous ranges and in some cases, surpass them, it remains unclear whether they will increase further once August gets under way.

"Some are convinced prices are moving up and another group who sees the market more stable or it might go up at the beginning of August and down at the end of August, because demand is not as strong as expected," a trader said.


By: Caroline Murray
44208 652 3214



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