19 March 2009 13:15 [Source: ICIS news]
LONDON (ICIS news)--European butadiene (BD) consumers will be targeting a significant decrease for second quarter contracts amid a backdrop of ongoing oversupply and expectations of continued weak demand, sources said on Thursday.
“We need support from our contract suppliers to be competitive on (our) markets so we can keep operating,” a consumer said, adding that sellers needed to “help us with pricing to make the best of a difficult situation”.
The consumer said it would be more economical to increase rates at its Asian operations than continue in ?xml:namespace>
“The main issue in Q2 is that we don’t have any demand. We could stop production,” another contract buyer said.
Another large butadiene consumer said that the final contract price would not stimulate additional demand, but that “[we] need to bring
Although contract discussions were still in the very early stages, a couple of contract buyers said that their targets centred on a number around €350-400/tonne, which would suggest a drop of at least €200/tonne. Another said it had focused on a value circa €400-450/tonne.
First quarter contracts settled at €600/tonne ($811/tonne) on a free delivered (FD) northwest Europe (NWE) basis. This compared with US values for March at 25cts/lb (€407/tonne) delivered and Asian spot values in the low $500s/tonne.
Additionally, consumers noted that domestic spot prices were currently being pegged in the mid €300s/tonne by chemical market intelligence service ICIS pricing.
In January, oversupply had been so excessive that some European producers were forced into shipping volumes to
Netbacks had since improved, highlighting a less lengthy European supply and demand balance. However, at numbers in the high $200s-300/tonne, they were still below cost.
Producer ideas differed from those of buyers. While the general market sentiment was that “a correction was necessary”, a drop of up to €100/tonne was mentioned by two producers.
“There is an argument about having
The view was that the second quarter was traditionally a period of peak demand, even in these unpredictable recessionary times, and that additionally the trend towards favouring ethylene (C2) and propylene (C3) by cracking lighter feeds, particularly in the US, would help to adsorb any surplus availability in Europe.
Discussions were expected to continue into next week, with contract parties hopeful of a settlement prior to the National Petroleum Refiners Association (NPRA) meeting in
($1 = €0.74)
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