Europe MEG market in stalemate as ethylene August contract still unsettled

Source: ICIS News


LONDON (ICIS)--The European monoethylene glycol (MEG) monthly contract remains unconfirmed in the final days of July as stalemate ensues in the market once again.

Previously, an initial contract settlement was agreed by a seller and a buyer but there was a lack of support for the initial July rollover.

Opinions between buyers and sellers were divided and a limbo period ensued.

Some on the buy-side of the market consider the rollover for July too high and felt that a double-digit decrease was expected due to previous factors including developments in Asia and a decrease in the July ethylene contract price upstream, for example.

As a consequence, some market sources think that they could be stable or a shade lower level for August contracts.

By contrast, prices in Asia rallied towards the end of last week and overseas developments are often considered in European contract discussions.

Europe is a net import of glycols, so an increase in Asia levels could make it more attractive for the US to send material to China rather than Europe.

At the start of this week China main port prices jumped up on restocking activities and prices were $946-950/tonne CFR (cost and freight) on Monday.

European contract players also consider supply and demand conditions along with feedstock movements in the upstream ethylene market.

Supply improved a bit in the spot market, causing prices to soften slightly in July after a period of high levels.

Consumption from the polyethylene terephthalate (PET) industry also improved after certain upstream supply constraints but some are unsure if the downstream market is out of the woods yet.

Nonetheless, contractual offtake from the PET sector is good, with enquiries for additional MEG volumes.

Bids for US and Middle Eastern material where mentioned last week for early September spot material.

Demand in the truck market is ticking along, and the coolant market is expected to carry on improving in the coming weeks.

Forecasts for demand are also in good shape in preparation for the winter season.

There was isolated mention last week of some disappointment in demand during summer though.

The August ethylene contract settlement is yet to emerge and MEG contract discussions are expected to reignite after that.

MEG is mainly used in the production of polyester fibres, resins and films (around 80% of global consumption), followed by use in PET resin. It is also used as automotive antifreeze.

Picture source: Martin Poole/Mood Board/REX/Shutterstock

Focus article by Melissa Hurley