US Nov MEG contracts fall on better supply, slower demand but Dec could turn bullish

17 November 2017 23:00 Source:ICIS News

HOUSTON (ICIS)--An improved supply picture and slowing demand conditions led to a decrease in the  US November ethylene glycol industrial-grade (EGI), or monoethylene glycol (MEG), contract prices, but exports from the US are expected to pressure prices up for December.

November MEG contracts were assessed on Friday at 41-47 cents/lb ($904-1,036/tonne) FOB (free on board), a decrease of 2 cents/lb.

US MEG supply is back to normal levels, with all producers up and running, according to sources.

There is some demand coming from the de-icing and antifreeze sectors with the onset of the winter season, but overall demand is slow with the end of the peak polyethylene terephthalate (PET) season.

As a result, it appears that the price decreases that were announced this month held in the market.

Meanwhile, US export activity is healthy again, with better supply along the US Gulf Coast.

Uncertainty remains regarding the future of Mossi and Ghisolfi's (M&G) integrated PET/PTA plant under construction in Corpus Christi, Texas, or its plant in Apple Grove, West Virginia, which ceased operations in late October.

Sources have commented it is possible that the MEG that was allocated for its plants in the US could end up being exported to other regions, as all of it cannot be consumed domestically.

Looking ahead, the market outlook is slightly bullish for next month.

Sources expect prices to move up next month as MEG continues to be exported to Asia, thereby putting pressure on domestic supply.

"It does look like MEG will go up 1-2 cents/lb in December," a source said.

This is also reflected in Asia Contract Price (ACP) nominations that have been put out $30/tonne higher for December.

US prices can take some direction from the Asian markets.

This would mirror what happened in December 2016, when prices registered an increase for similar reasons.

"All of the excess MEG generally moves to China at year-end, making MEG tight in the US, and I expect the same for this year," a source said.

However, this would come at a time when demand in the US remains seasonally slow.

Meanwhile, markets in Asia are expected to be flat to slightly up in Asia as prices get some support from ongoing and upcoming shutdowns in the Middle East and northeast Asia.

Major glycol producers in the US include Eastman Chemical, Huntsman, Indorama Ventures, LyondellBasell, Nan Ya Plastics, Shell Chemical and MEGlobal.

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Focus article by Tarun Raizada

By Tarun Raizada