Tight market pushes European MEG prices up

14 August 2013 17:12  [Source: ICIS news]

LONDON (ICIS)--A tightening monoethylene glycol (MEG) market is resulting in higher spot and a likely hike in the August contract price, sources said on Wednesday.

"We are looking at €1,020/tonne ($1,360/tonne), in that region. The European [spot] market is increasing and there is a lot of demand. It's not driven by raw material costs, it is just supply and demand. Asia is increasing as well," a producer said.

Buyers acknowledge the need for an August contract price increase because of strong upstream ethylene and naphtha prices and higher European and Asian spot MEG values, but they are not prepared to accept a four-figure price.

"MEG will go up more than [upstream] ethylene but not as much as [producers] want… availability is no problem. Asia went up and European spot went up, but it won't go up like it did in Asia. In Europe, prices don't go up or down by as much as they do in Asia," according to a customer.

The European MEG contract price was agreed at €947/tonne FD (free delivered) NWE (northwest Europe) in June and July.

Truck spot prices are over €900/tonne FCA (free carrier) NWE, for the first time since March.

"We have sold out completely. We may have 50 tonnes left. If I had to offer today FCA would be €920/tonne," a distributor said, echoing comments made by others.

A producer added it had achieved €930/tonne on Wednesday.

Bulk product is quoted at an increase, too, and there seems to be nothing available for prompt delivery. A mixture of shutdowns, production problems in the US and product being diverted to the dominant Asian market during a fast pick-up in European demand, have all contributed to the price spike.

Levels above €900/tonne CIF (cost, insurance and freight) NWE are being quoted for September deliveries. Bulk product has not cost this much since March.

The certainty of a firm market goes as far as mid-September, then the industry is unsure how prices will develop. Production costs and global demand/supply dynamics will all factor into forthcoming price discussions.

($1 = €0.75)

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By: Caroline Murray
44208 652 3214

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