27 January 2009 23:06 [Source: ICIS news]
Butane is a key feedstock in the production of MA.
Butane at Mont Belvieu closed on 26 January at 115.50-116.25 cents/gal, which was up from 105.00-107.00 cents/gal on 23 January and a gain of more than 30 cents/gal from early January.
Several butane industry sources said the high prices are an anomaly.
The recent spike came from butane markets players who sold January barrels but did not have product when January actually came around. The result was a run on barrels, an industry source said.
The situation caused an artificially tight market, the source said.
"There was butane out there but people were holding onto it," the source said. "That's a clear signal of squeezing those looking to buy it. Evidently there was a lot of barrels that needed to be bought."
US MA contracts have been on a decline with a 7-cent/lb ($154/tonne, €117/tonne) reduction in January and another 3.5-cent/lb decrease proposed for February.
Both of the initiatives were released when butane was at 65 cents/gal, but the January average for butane will be in the low-90 cents/gal range if the prices stay up throughout the end of the week.
The lower price adjustments for January and February do not match up with the higher butane prices and producers could try to recoup the difference in March contract prices, a large US buyer said.
"It doesn't look good in March," the buyer said.
Higher butane prices are triggering some producers to examine higher March prices and possibly recall their temporary voluntary allowances (TVA).
By employing a commonly-used formula, the cost of producing MA is about 7 cents/lb higher when butane is in the low 90 cents/gal compared with mid-60 cents/gal, a major ?xml:namespace>
The January MA contract was assessed in a range between 62.70-68.70 cents/lb, according to data from global chemical market intelligence service ICIS pricing.
US MA producers include Huntsman, Lanxess, Flint Hills Resources and Marathon. Bartek makes MA in
($1 = €0.76)
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