Price and market trends: Europe MEG looking bullish into July

04 July 2014 10:13 Source:ICIS Chemical Business

Spot prices have shifted up a little, and July business took place as high as €815/tonne CIF NWE

The European monoethylene glycol (MEG) market has adopted a bullish stance and there are already rumblings of potential increases for July, sources said on 27 June.

“I see prices slightly increasing and even more increasing than the ethylene impact will push it,” a producer said.

Spot prices have shifted up a little, and July business took place as high as €815/tonne CIF (cost, insurance and freight) NWE (northwest Europe). Despite buyers clearly prepared to pay the higher spot prices, they were still unsure whether or not it was the right decision to buy now for delivery in four or five weeks’ time.

The market has only just agreed to the June contract at plus €9/tonne from May. However, with downstream polyethylene terephthalate (PET) market already speculating on a dramatic increase in upstream paraxylene (PX), the market is on tenterhooks to know what PET production costs will be for July.

“At the moment I see paraxylene (PX) moving up by €70/tonne, MEG is forecast to go up by €30/tonne, so €55/tonne is the cost increase [on downstream polyethylene terephthalate (PET)]…,” a PET reseller said.

PET is currently short on prompt domestic product, partly because of delayed start-ups of new units, and a phase of preselling for July deliveries.

Any mention of July MEG contract prices is purely speculative for now, and while sources from downstream markets are expecting to see an uptrend, this idea has not been backed up specifically by anybody who is normally on the buy side of the MEG contract settlement.

“I would also think that it depends on when discussion starts, I rather see an increase than a rollover or decrease [from the June to July contract price],” a reseller said, echoing comments made by others.

Looking at the developments in Asia and a €50/tonne increase in upstream ethylene, MEG does have a bullish look to it today. Add to that some supply problems and an increase may be validated.

By Caroline Murray