FocusAsia BD sellers eye US market; price spikes to continue

28 July 2009 05:36  [Source: ICIS news]

By Helen Yan

SINGAPORE (ICIS news)--Butadiene producers and traders in Asia are preparing to sell cargoes to the US market following the announcement of massive price hikes by their US counterparts, industry sources said on Tuesday.

This could aggravate the tight supply conditions in the region and jack up BD prices further, even after spiking by more than $300/tonne (€210/tonne) since mid-June to $1,100-1,120/tonne CFR northeast (NE) Asia last week, they added.

“Supply is extremely tight in Asia and we are talking about September offers in the range of $1,250-1,300/tonne FOB (free on board) Korea," a Korean trader said.

With an intra-regional freight cost of $60/tonne, the offers translated to $1,310-1,360/tonne CFR NE Asia, the trader said.

US BD producers nominated price increases of between 15-18 cents/lb ($331-397/tonne) for August contracts, also due to tight supply following a spate of plant outages and limited supply of crude C4, from which BD is extracted. This opened up the arbitrage window for Asian material to flow to the US.

“We are looking to put together a 3,000-5,000 tonne cargo to sell to the US market,” a Korean trader said.

A major Korean BD producer said: “We have put aside 2,500 tonnes for September shipment to the US and other producers are also looking at doing the same thing.”

The market was rife with talk that some Korean and Japanese traders had upped their bids to get their hands on dwindling spot cargoes in Asia for the US market.

BD contracts in the US usually settle at the lowest price nominated by the four main BD producers. Assuming the proposed 15 cent/lb hike was accepted, this would push US August BD contracts up to 60 cents/lb, equivalent to $1,320/tonne on a CFR US Gulf basis, from July's 45 cents/lb.

US producers Shell and LyondellBasell had restricted sales and put their customers on allocation basis.

In Asia, tight supply caused by delays in the start-up of a new 800,000 tonne/year cracker and 120,000 tonne/year BD plant of Fujian Refining and Petrochemical Co in China had been pushing BD prices higher.

Last week, BD spot prices in Asia surged by about $100/tonne to $1,100-1,120/tonne CFR NE Asia.

The start-up of the Fujian plant, which should ease the tight supply conditions, has been delayed to September from its orginal schedule to start commercial operations in mid-July.

Dwindling deep-sea supply from Europe also added to the upward price pressure on BD, market sources said.

($1 = €0.70)

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By: Helen Yan
+65 6780 4359

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