Europe July MEG contract widely expected to increase from June

18 July 2014 16:32 Source:ICIS News

LONDON (ICIS)--The European monothylene glycol (MEG) July contract price is widely expected to increase from June’s €909/tonne, because of higher production costs and the supply/demand balance, sources said on Friday.

Everybody knows that MEG should be going up. We are not against it going up; the question is by how much?” a buyer said.

The debate seems to be between €930/tonne FD (free delivered) NWE (northwest Europe) on the one hand, and €960/tonne at the other extreme.

“Our idea is not more than €930/tonne…€960/tonne is ridiculous…The difference between Asia and Europe for MEG can't go on increasing…We have been giving pretty high [contract] figures for the last few months… With this kind of price difference, how can we survive?” according to the buyer. 

Feedstock ethylene increased by €50/tonne from June to July in what has been a finely balanced MEG market that veered on short a few weeks ago.

“Demand is one factor and ethylene is another factor and the price difference with Asia is not huge… For August we believe a further increase is realistic because of Asia. The Asian contract price has increased with €27/tonne or $20/tonne and that will have its effect for Europe,” according to a seller.

The idea that European contract prices are on the rise is not shared by others, however.

“I would expect something like a rollover [for July]. In June I thought clearly an increase. It is July 18 now and nothing has happened. Buyers say it will go down in August, and should be down in July,” a reseller commented. 

There was some expectation that a settlement would be agreed today or early next week.

“€940/tonne seems to be kind of a given,” a buyer of downstream polyethylene terephthalate (PET) said.

Discussions continue.

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By Caroline Murray