High prices could go 1¢-2¢/lb higher
By Staff -- Purchasing, 6/1/2000 6:00:00 AM
The market for ethylene glycol is tight, say producers, and while prices currently appear to be fairly stable, buyers are forecasting some upward price movement of about 1¢/lb to 2¢/lb in third quarter 2000.
Improved demand for ethylene glycol late last year and a sizeable run-up in raw-materials pricing in the first quarter of this year have caused producers to announce some significant price increases in the past six months. According to data from buyers who responded to Purchasing's monthly chemical transaction price survey, ethylene glycol prices currently average about 29¢/lb for contracts and a little more than 33¢/lb for spot market material. Compare this to average prices during the fourth quarter of last year (24¢/lb for contracts, about 30¢/lb for spot tags).
While most suppliers continue to call attention to supply tightness for ethylene glycol, some buyers believe that this may be an effort to keep current prices in place. "Suppliers keep telling us that materials supply is very tight," says an ethylene glycol buyer at a West Coast-based manufacturer of magnetic wire. "But suppliers have been saying this for the past six months, and we haven't had any problem getting material. We buy about 700,000 lb/yr of ethylene glycol," says the buyer. "And the price we're paying now is the highest we have paid since I can remember."
Purchasing's forecast: Buyers' data forecasts an increase of about 1¢/lb to 2¢/lb in third quarter 2000. Prices at this time will average 31¢/lb for contracts and 33¢/lb for spot tags. These prices will then likely soften by a penny/lb or so, say buyers, and then hold through the end of the year.
Data from The pace Consultants Inc., a petrochemicals market analysis firm, based in Houston, Texas, calls for generally stable pricing through the third quarter. According to pace data, which measures average U.S. Gulf Coast pricing, whereas Purchasing data is based on prices reported by buyers from across the country, ethylene glycol contracts are forecast to average about 28¢/lb to 29¢/lb for the month of May. pace predicts contract prices to remain at about 29¢/lb during the third quarter of this year, before falling a couple¢/lb to 27¢/lb on average in the fourth quarter.
Most sources identify moderate long-term demand growth for ethylene glycol (about 3% to 4%/yr). And according to pace, domestic ethylene glycol production is running at about 1.95 billion lb/yr, compared with annual consumption of about 1.8 billion lb/yr.
"We haven't seen much pricing activity lately," says Albert A. Vargo, director of purchasing at Spartan Chemical Co. Inc., based in Maumee, Ohio. "Suppliers seem to be somewhat tentative in their marketing efforts right now, because they probably are waiting to see what's going to happen once the merger between Dow Chemical and Union Carbide is finalized," he says. "Meanwhile, the other major players, such as Equistar and Eastman, view the merger with some trepidation. They appear to be posturing in the marketplace in anticipation of competition from the new company."
In supply news, Shell Chemical Co., Houston, Texas, plans to bring a new ethylene glycol unit online at its Scotford, Alberta, Canada plant. The unit, which is slated for completion during the fourth quarter of this year, will add about 400,000 tons/yr of capacity to the North American market.
Mobil Chemical Co., Fairfax, Va., has entered discussions with Petroquimica De Venezuela, S.A., to build a world-scale petrochemicals complex in Jose Venezuela. When completed, the plant will feature a one million tonne/yr ethylene cracker and downstream facilities, which will produce approximately 750,000 tonnes/yr of polyethylene and 420,000 tonnes/yr of ethylene glycol.
In other supply news, basf Corp., Mount Olive, N.J., has scheduled an ethylene glycol and ethylene oxide expansion at its Geismar, La., facility, scheduled for early 2001. The company plans to bring 310 million lb/yr of ethylene glycol and 330 million lb/yr of ethylene oxide online.
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