US BD maker again splits monthly settlement as Dec contracts rise

03 December 2010 22:21  [Source: ICIS news]

HOUSTON (ICIS)--US butadiene (BD) contracts settled at different levels for December because a producer refused to match the nominations of its rival suppliers, market sources said on Friday.

US contracts usually settle at the lowest price proposed by the four main US producers, which for December nominated increases of 2-4 cents/lb ($44-88/tonne, €33-67/tonne).

Two of those producers sought an increase of 2 cents/lb, while the two other suppliers stepped out with initiatives for increases of 3 and 4 cents/lb.

The nominations for December would normally put BD at 86 cents/lb.

But the producer seeking the 3-cent/lb increase refused to agree to that price, pushing for 87 cents/lb instead and splitting the US market for the second time in three months.

The same supplier in September declined to settle with the rest of the market, leaving BD contracts split at 92 and 96 cents/lb.

The split settlement in September was the first in more than 10 years in the US market.

Despite the lack of market consensus, most US customers would see an increase of only 2 cents/lb in December, as the dissenting producer has only around 15% of the US BD capacity.

Meanwhile, the other three producers had all settled at 86 cents/lb, sources said.

A weighted average price based on the December nominations of the four producers and their individual plant capacities would put BD in December at 86.1 cents/lb.

However, this figure does not take into account operating rates, nor the actual market share of the producers involved in the settlement process.

Market participants had expected BD contracts to roll over or settle slightly higher in December as a result of tighter supply in the US and Europe and higher prices in Asia.

US BD spot prices rose by 10.00 cents/lb in the second week of November, when supply began to tighten.

The contract increase in December snapped a three-month downtrend in the US market.

US BD contracts fell by 2 cents/lb to 84 cents/lb in November. That followed a 6 cent/lb reduction in October, while September contracts were assessed 2 cents/lb lower.

US BD producers include ExxonMobil, INEOS, LyondellBasell, Shell and TPC Group.

Buyers include Invista, International Specialty Products (ISP), Lanxess, Michelin and Negromex.

($1 = €0.76)

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By: William Lemos
+1 713 525 2653

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