Sluggish demand for MEG pulls down basic price of domestic players – 1 Apr 2014

The demand for MEG has been moderate to weak across major trading hubs in India. However, strong demand by the end of this month should uplift the current market sentiment. In this review, Indianpetrochem takes account of present stock availability in Mumbai and Ahmedabad market amid recent basic price revision for the chemical.

Reliance Industries Limited (RIL), Indian Glycol Limited (IGL) and Indian Oil Corporation (IOC) are  key MEG players in the market with pan India presence, out of which RIL has the largest market share.

On 1st April, 2014, RIL revised the basic price for MEG from Rs. 73 per kg (exclusive of all taxes) to Rs. 69 per kg (exclusive of all taxes) . However, the website gathers from various sources that there is no availability of any RIL stock in any major market across the country at present.

A prominent trader informed the website, " RIL mainly uses the chemical as an intermediate to manufacture products like PET, Polyester, etc. As such, RIL offers limited MEG in the market, based on its consumption requirements. While the company has reduced the current market price, there aren't any RIL stocks in the market, but it is speculated that within 15- 20 days RIL stocks should be available in the market".

At present the basic price of IOC manufactured MEG is Rs. 63.9 per kg (exclusive of all taxes) while imported MEG sells at Rs. 68.5 per kg (exclusive of all taxes).

The demand for MEG is weak in Delhi and Mumbai market, which is in line with global / Asian demand trend for the chemical, while the demand for the chemical is strong in Ahmedabad market due to significant presence of industrial units in the state.

Meanwhile, in Ahmedabad market, there is moderate stock position for IOC manufactured MEG and limited availability of imported MEG. On the other hand, in Mumbai market there is limited availability of IOC manufactured MEG and good stock position for imported MEG.

In context of the future market outlook a trader cited, "The demand for MEG is sluggish right now across major trading hubs. However, there is a market expectation that this trend will shift by the third to fourth week of this month, thereafter, the demand will gain momentum backed on strong purchases from PEG and PET manufacturing sector".

Overall, it is expected that stong cyclic demand for PEG and PET manufacturing will uplift the demand in the Indian market, but, it will be interesting to note if the change in demand  will increase the prices for the chemical. While major industry participants are bullish on the macroeconomic indicators for India, its considerable to note that weak international dynamics for MEG can adversely impact the Indian prices in the future.