Overcapacity will erode prices in 2000
By Staff -- Purchasing, 9/2/1999
Following a recent 2¢/lb increase in ethylene glycol contracts and spot tags in June, producers have announced a 6¢/lb increase for antifreeze-grade ethylene glycol, effective in August.Despite price increases, buyers and industry experts are forecasting softening prices in 2000.
"The latest price increase was made in order to bring buyers in line, and in support of earlier increases," says George West, an analyst with Commodity Consultants Group, based in Houston, Texas. "Antifreeze is a fairly stable market, and not much growth is predicted due to increased use of long-life and universal coolants," West says.
According to data from Purchasing's monthly chemical transaction price survey, contract prices for ethylene glycol, industrial grade, currently average about 27¢/lb, up from an average of 22¢/lb in May. Spot tags are currently at 25¢/lb, say buyers, which is up from the May average (21¢/lb).
Buyers expect prices to stabilize at about 27¢/lb for contracts and about 25¢/lb on the spot market for the remainder of the year, according to Purchasing's data. Then, as new capacity from domestic and overseas producers comes on line in the third and fourth quarters of this year, buyers forecast contract prices to soften to an average of 26¢/lb in the first quarter. Spot tags will fall to 24¢/lb on average and remain flat through this time next year, say buyers.
Petrochemical industry analysts at The pace Consultants, Inc., located in Houston, Texas, say supply and demand for ethylene glycol are in line, due to tight ethylene supplies, improvement in exports to the Asian markets, and increased demand from the peak of the antifreeze packaging season. According to pace, demand also is strengthening for ethylene glycol used in PET bottles, as soft drink bottlers increase their requirements for the summertime boost in soft-drink demand.
pace pegs ethylene glycol prices at about 22¢/lb for both contracts and spot tags, but their data is based exclusively on Gulf Coast prices. Purchasing's data takes an average of prices across the country.
George West, an ethylene glycol analyst with the Commodity Consultants Group, based in Houston, Texas, agrees that demand for antifreeze and fluid products typically picks up in the third and fourth quarters as antifreeze blenders prepare for winter. But West also adds, "There was already quite a bit of blending earlier in the year."
"Antifreeze drives the market for ethylene glycol, and we've seen some price movement recently," says R.L. Cubitt, purchasing manager at the Mobile Paint Manufacturing Co., located in Theodore, Ala. "Prices for ethylene glycol have increased twice in the last two months," he says. "For us, prices were up 2¢/lb in June and 1¢-Þ¢/lb in July," he says.
But Cubitt doesn't think the increases will hold for long. "I've been getting several calls from producers and distributors trying to move ethylene glycol, so I think that prices will likely soften in the near future," he says.
End uses for ethylene glycol include coolants and fluids used in the automotive industry, as well as industrial hydraulic fluids and solvents.
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