US BD producer shocks buyers with 18 cent/lb nomination

20 August 2009 19:43  [Source: ICIS news]

HOUSTON (ICIS news)--US butadiene (BD) producer LyondellBasell on Thursday nominated a September increase of 18 cents/lb ($397/tonne or €278/tonne), stunning buyers who expected price initiatives about half that amount.

“It is just ridiculous,” a US buyer said, adding that BD consumers would be unable to pass through the increase downstream.

Another buyer said it expected BD contract initiatives of around plus 10 cents/lb for September.

US BD prices have more than doubled since May on the back of tight supply.

Contracts in August settled at 60 cents/lb, up by 15 cents/lb from July, according to global chemical market intelligence service ICIS pricing.

That increase followed a 14 cent/lb hike in July and a 4 cent/lb increase in June.

In a letter sent to its customers, LyondellBasell said the proposed increase for September “reflected current market conditions”, according to a market participant.

The company did not immediately respond to a request for comment.

US BD is increasingly tight due to scarce supply of crude C4, from which the product is extracted.

C4 supply availability is restricted because of the growing use of lighter and cheaper feedstocks at US olefins plants. C4 is produced through the naphtha-cracking process.

Naphtha accounted for only 14% of the volume of feedstocks used in US crackers in July, according an industry survey. That compares with 15% in June and 17% a year earlier.

Ethane, the lightest feedstock, accounted for 53% of feeds in July, the same survey showed.

US BD contracts usually settle at the lowest price put forward by the four main producers.

The three other US producers are expected to unveil their nominations in the coming days.

US BD buyers include Michelin, Lanxess, Invista and Negromex. BD producers include Texas Petrochemical (TPC), ExxonMobil, LyondellBasell, Shell and INEOS.

($1 = €0.70)

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