LONDON (ICIS)–The European monoethylene glycol (MEG) spot price is softening as customers from the coolant market hold back on purchases on expectations that prices will continue to drop, buyers, producers and resellers said on Friday.
“The perception [of antifreeze buyers] is that the prices are coming down and will continue to come down… they will have to buy at some stage. As everyone starts buying, they will probably do short term deals rather than normal season deals,” a reseller said.
MEG spot prices have slipped below €900/tonne on bulk and not far from this on trucks. This is down from what many considered to be an overheated peak at the end of May, when trucks touched €1,100/tonne FCA (free carrier) NWE (northwest Europe), and bulk was at €1,050/tonne CIF (cost, insurance, freight) NWE.
Supply is normalising after a lengthy period of significant shortage and upstream ethylene prices look set to decrease from July to August.
Add to the mix weakness in the all-important China market and a struggling downstream polyethylene terephthalate (PET) sector, the downward price trend seems the obvious outcome.
“I think Europe will slowly but surely follow the Chinese trend, especially with supply better locally, imports, and demand is off a bit,” a second reseller said.
Coolant buyers may need to buy, but they are waiting for prices to decrease further before showing their hand.
At this stage there are not many sellers available, so prices are coming off but only gently.
“There is not that much in the tanks, so if everyone comes [into the market to buy] all of a sudden the material will get tight and prices will move up again,” a third reseller said.
The consensus is that the coolant sector will have to wake up at some point, but questions remain over when and how.
“Unless they do so within the next two to three weeks [at the] absolute maximum they won’t be able to get their product into the retail outlets in time… when one moves they all will and the market will jump like a scalded cat,” a fourth reseller said.
On the other hand, customers may prefer to buy hand to mouth, rather than securing large volumes at once. This could be the case for those antifreeze blenders recording worse than expected antifreeze sales, which have resulted in a build-up of expensive stocks of antifreeze.
“I don’t think in the next couple of months we will see a sudden offtake. There is no reason why demand should pick up again if there is unsold stock now,” the second reseller said.
As long as European producers appear to have limited supplies, importers wait for viable bids and possibly back to back business, and customers bide their time, the market and prices will tick over at the current, slow pace, sources agreed.
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