Ethylene glycol prices look set for 2¢/lb increase
By Staff -- Purchasing, 2/11/1999
Limited supply and seasonal demand have prompted domestic producers of ethylene glycol to raise their prices for contract and spot transactions by 2¢/lb. This increase will mark an end to a steady slide for ethylene glycol prices, and producers see it as the beginning of a recovery.Increases in seasonal demand are one possible reason for the price increase. Ethylene glycol is a main ingredient in antifreeze. Demand for antifreeze and fluid products typically picks up in the fourth quarter as consumers prepare for winter. With limited supplies during the month of December, producers pushed for the 2¢/lb increase for ethylene glycol as well as diethylene glycol and triethylene glycol, which took effect on January 1, 1999.
Producers also expect demand for ethylene glycol to pick up by the end of the first quarter. Buyers may see a 1¢/lb price increase at this time when bottle producers begin to gear up their production of polyethylene terephthalate (PET) to accommodate the demand for plastic bottles for the summer beverage season. After that, industry experts expect prices to stabilize, as large quantities of new capacity from domestic and overseas producers are expected to come on line in the third quarter of this year.
According to data from Purchasing's monthly chemical transaction price survey, contract prices for ethylene glycol have fallen steadily from 30.5¢/lb in the first quarter of 1998 to their present position at about 28¢/lb. Buyers should look for ethylene glycol contracts to stay within the range of 27¢-29¢/lb until the third quarter of this year, when they will stabilize at about 27¢/lb.
Spot prices have fallen further than contracts. In the first quarter of last year, ethylene glycol cost an average of 30¢/lb on the spot market. Prices have now dipped to about 26¢/lb and will likely fall another cent to 25¢/lb in the second quarter of this year, according to buyers' responses to our survey. After the second quarter, prices will stabilize at 26¢/lb and remain there.
Petrochemical industry analysts pace Consultants, Inc., located in Houston, Texas, say demand for antifreeze-grade ethylene glycol is near the end of its modest seasonal upturn and demand for fiber-grade ethylene glycol continues to be soft with no recovery in sight. pace puts prices for contracts at about 15¢/lb and about 20¢/lb for spot tags, but their data is based exclusively on Gulf Coast prices. Purchasing's data takes an average of prices across the country.
Other markets for ethylene glycol include coolants and fluids used in the automotive industry, industrial hydraulic fluids and solvents.
Production of ethylene glycol has been reduced in the Gulf, which has tightened supplies. Production outages at several North American ethylene glycol plants also have occurred in the past two months. These include the lack of ethylene at Union Carbide's Taft, La., plant and Shell's Geismar, La., plant which have delayed production of ethylene glycol. Both companies report that production of ethylene is now back on line.
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