After touching a low of Rs 25,500 per tonne in June 1998 prices of MEG have increased to Rs 27,000 per tonne. Prices of MEG were around Rs 29,000 per tonne in October 1997.

MEG is primarily used in the manufacture of PSF, PFY, PET, polyester chips and films. In India MEG is manufactured by Reliance, IPCL, India Glycol and Nocil, with Reliance accounting for 78 per cent of the market. This is inspite of the fact that the company consumes around 60 per cent of the produce for its own use.

Increase in price is mainly on account of higher raw material prices of ethylene, which is been increasing over the past few months on account of higher demand from polyethylene manufacturers after opening up of the Chinese market. Prices of ethylene have shot up from around $200-$210 per tonne FOB Korea to the current levels of $290-$300 per tonne.Prices of ethyleneoxide, the intermediate used in the manufacture of MEG have also improved. Prices of ethylene oxide which had fallen to Rs 41,200 per tonne in April 1998, increased to around Rs 44,000 to Rs 45,000 per tonne.

Import of MEG, industry sources say has fallen slightly and is currently in the range of 3000-3500 per month from earlier levels of over 4,000 per tonne. This is inspite of the fact that local demand for MEG is currently increasing at a rate of roughly 15 per cent. Demand for MEG in the current fiscal is pegged at 4.8 lakh tonnes as against 4.12 lakh tonnes in the previous year.

Demand for MEG increased by 34 per cent in 1997-98.

Reliance which is the tenth largest manufacturer of MEG with an installed capacity of 340,000 tonnes is way ahead of its competitor and is virtually controlling the price. Indian Glycol is the only player in the industry that manufactures MEG through the molasses route.

Traders are optimistic that the prices will remain firm on account of higher demand from polyester andPET manufacturers, which too are maintaining their growth rate of 20 per cent. Industry sources say that though margins in the polyester business is very thin, most of the manufacturers are operating at near full capacity in order to distribute their overhead costs.

However, some traders pointed out that output of the cotton crop could play an important role in dictating the prices of MEG in future. Though current estimates of cotton crop is around 130 lakh bales higher than 111.5 bales in the previous year, traders warn it is too early to give an exact estimate on the crop. In 1997-98 as a result of a drop in cotton crop to 111.5 lakh bales from 142.52 lakh bales in 1996-97, prices of cotton shot up, which resulted in demand for polyester shooting up. However, if the cotton crop in this season is good its prices will fall, which could result in consumption shifting towards. This could result in lower demand for polyester, thus lower demand for MEG, which could have an impact on its price.