LONDON (ICIS)--European propylene glycol ether (PGE) spot prices are set to increase in February after the upstream propylene contract settled at double-digits earlier this week and on the back of healthy demand.
The European February propylene contract reference price has been agreed at €940/tonne, up by €28/tonne from January, market participants said on Tuesday.
PGE sources had been waiting for propylene to settle in order to gain a clearer picture on February pricing targets.
Due to the upstream gains, higher pricing targets are likely, as sellers strive to maintain margins.
Upstream propylene’s prices have increased during the first two months of the year. In January, the downstream PGE market already posted some cost pass through price increases.
Producers are optimistic for the year ahead in terms of demand, and have described order levels at a surprisingly healthy level for January so far.
Coatings demand seasonally picks up during the warmer months of the year, so higher demand may be in store.
A seller said that it had sold out January volumes already in the third week of the month, and was able to achieve price increases for both methoxy propanol (PM) and di-propylene glycol monomethyl ether (DPM) on the back of incremental volumes.
PGE growth expectations for 2018 are higher than for ethylene-based glycol ethers, sources said.
Interestingly, sources have paid rare attention to the US PGE market, which could indicate potential arbitrage trade flows from Europe to the US on the back of soaring propylene feedstock prices in that country.
This has resulted in higher pricing initiatives emerging in the US glycol ether market, with a producer recently saying this could stimulate a switch in trade flows, adding that a pricing arbitrage could develop to bring material from Europe to the US.
There was slightly less demand for methoxy propanol acetate (PMA) material, according to a distributor, while another source mentioned prices touching the bottom end of the pricing range.
DPM prices remained at around €1,500/tonne FD NWE at the end of last week.
Nonetheless, sources mentioned prices for imported PMA material below the current ICIS range, especially of Asian origin, but there were no further details on confirmed business between buyers and sellers.
"These prices are there but only for a few buyers... The rest is buying at higher level," said a PGE reseller.
2017 was a difficult year to manage for PGE players due to the historic prices posted by methoxy propanol acetate (PMA) as well as supply issues in the European market.
PGE prices started soaring towards the end of the first quarter in 2017 due to tightening supply.
For the majority of the year prices, maintained their higher position on a year-on-year basis due to a series of planned and unplanned outages that plagued the market.
In November 2017, buyers found relief on improved availability, also helped by competitively-priced imported material from China.
PGE is commonly used as solvents and coupling agents in paints and in the production of coatings, inks, resins and cleaners.
PIctured: Inks, one of PGE's end markets
Source: Steve Parkins/REX/Shutterstock
Focus article by Melissa Hurley