MPG prices soar to three-year high on lack of prompt availability

04 July 2014 23:59 Source:ICIS News

LONDON (ICIS)--The fallout from the explosion at Shell and BASF’s upstream propylene oxide (PO)/ styrene monomer (SM) unit last month continues to pressure monopropylene glycol (MPG) prices, which spiked to a three-year high due on the back of an extreme prompt shortage, sources said Friday.

The MPG supply shortfall is primarily driven by PO being moved from captive use to the spot market and away from MPG to more profitable derivatives such as polyols. Planned and unplanned shutdowns at various production facilities have also been heard but not confirmed at the time of writing.

The consensus is that the spike in prices is purely supply-driven, but one producer noted there is also healthy demand from the unsaturated polyester resin (UPR) and detergent sectors.

Sellers are continuing to push for increases to recover profit margins eroded by net increases in the price of propylene throughout the year. Prices are expected to continue rising, as the full impact of the explosion is yet to be realised.

There is some resistance to these prices on the buy side. One buyers said the 250,000 missing tonnes of PO should not have this severe an impact on MPG while others, mainly contract buyers, deny there is a significant shortage of material. Buyers and traders said these substantially higher prices are not sustainable as are not demand-driven, adding that it is becoming increasingly difficult to pass on the higher costs to their customers.

Prices have firmed to their highest levels since July 2011, and the price range has been significantly widened to reflect the unique nature of the current market.

Europe MPG spot prices firmed to €1,280-1,400 free delivered (FD) northwest Europe (NWE). Prices up to €1,420/tonne were also quoted but not widely confirmed in the market.

By Stefan Naidu