US BD August surge may trigger demand destruction - buyer

30 July 2009 21:55  [Source: ICIS news]

HOUSTON (ICIS news)--US butadiene (BD) contracts were poised to jump to 60 cents/lb ($1,323/tonne or €939/tonne) in August, market sources said on Thursday, adding that the increase will likely destroy demand downstream.

According to one buyer, the contract jump will trigger a wave of demand destruction that will eventually impact BD once the cycle makes it way back upstream.

“You cannot expect to be highest-priced BD region in the world and not suffer an impact,” a source said.

“This will come back to bite them in the future,” a buyer said, referring to US BD producers.

US BD usually settles at the lowest price nominated by the four main US producers.

For August, one of those producers chose not to nominate, while the other three sought increases of 15, 17 and 18 cents/lb.

The initiatives for August came amid tightening US supply due to low availability of crude C4, from which BD is extracted.

Market participants said suppliers were converging to the plus 15 cents/lb initiative for August, sending BD to its highest level in the last eight months.

BD contracts in July settled at 45 cents/lb, up by 14 cents/lb from June, according to global chemical market intelligence service ICIS pricing.

BD is the main raw material for synthetic rubber-styrene butadiene (SBR), polybutadiene (PBR), and acrylonitrile-butadiene-styrene (ABS) resins. The product is also used to make adiponitrile (ADN) for nylon 6,6 production.

US BD producers include Texas Petrochemical (TPC), ExxonMobil, Equistar, Shell and Ineos. Buyers include Michelin, Lanxess, Invista and Negromex.

($1 = €0.71)

For more on butadiene visit ICIS chemical intelligence
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By: William Lemos
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