Price and market trends: US July MEG contract prices rise on strong demand, tight supply

24 July 2014 11:22 Source:ICIS Chemical Business

Supply of feedstock ethylene oxide going into MEG has been tight, as EO has been diverted into other derivatives.

US monoethylene glycol (MEG), or EG industrial-grade (EGI), contract prices for July were settled up at 52-53 cents/lb ($1,146-1,168/tonne) FOB (free on board) on the back of strong demand and more balanced supply, market sources confirmed on 16 July.

July contracts were up from 50-52 cents/lb FOB in June, as assessed by ICIS. For the purpose of the ICIS assessment, US contract prices represent levels paid by distributors on an FOB plant basis prior to any discounts, incentives or terminal upcharges.

June contract values were rolled over from the previous month at a time when supply was still plentiful and demand had not yet picked up as strongly as expected.

However, prices firmed in July as demand came up. By the end of June and going into July, demand in the downstream polyethylene terephthalate (PET) sector finally showed its seasonality strength, after a lacklustre start to the PET peak season.

Meanwhile, MEG producers cut back on production, which brought MEG supply into closer balance with demand. Market participants have also said that supply of feedstock ethylene oxide (EO) going into MEG production has been tight, as EO has been diverted into other derivatives where demand is also strong.

Meanwhile, US diethylene glycol (DEG) contract prices for July moved up to 64-72 cents/lb ($1,411-1,587/tonne) FOB (free on board) amid a very tight market and strong demand, market sources said on 16 July. July prices were up from 61-69 cents/lb FOB in June.

DEG has been on an upward price trend since May as supply remained tight throughout on the back of strong demand. Domestically, demand has been strong in the downstream unsaturated polyester resin (UPR) sector.

By Feliza Mirasol