Both long term and short term indicators show that Monoethyleneglycol (MEG) prices will remain firm as we head into 2011. With US spot price near 47 cents/lb (~1040 $/ton), there have been inquiries from Europe and China Far East , there are just a handful of plants coming up in comparison to polyester filament and PET plants. This overall feel for the market is emphasized by the fact that many buyers have confirmed that discounts negotiations were smaller as we head into 2011 compared to 2010. At the same time, offsetting factors of an impending increase in demand could be Chinese economic policy, cotton futures & rate of global economic recovery. Subsequently the short term demand is also consistent with the long term. Asian MEG prices are pushing up right now, with a range of $1075-1090. Sales to output ratio of yarn plants have increased to 50-80% from the recent past to 100-120%, which suggests a depleting inventory position. There is information of further hikes to the region of 200%, and inventory levels of yarn are just below 20 days. Such spikes in the downstream demand give rise to market speculation, as some traders are also offering at $1090/ton level. However, will such prices be possible, given that the big three MEGlobal, Shell & Sabic settle at a strong, but a realistically sustainable rate of $1150 contract price, which is $50-100 over Asian spot prices and down from their November numbers.
CONCLUSION: The limited supply of feedstock Ethylene oxide (EO) and outages of monoethylene glycol (MEG) will ensure a robust price of MEG.
