US BD contracts head toward another split settlement for February

28 January 2011 23:07  [Source: ICIS news]

HOUSTON (ICIS)--The US butadiene (BD) market seems headed for yet another split settlement in February, as at least two producers were set to ignore the lowest contract nomination, market sources said on Friday.

The recent string of split settlements points to a new era in the US BD settlement process, where each supplier individually negotiates prices with its consumers.

“That would be a reasonable conclusion,” a market participant said.

BD contracts settled at 91 cents/lb ($2,006.19/tonne, €1,464.52/tonne) in January but some accounts were 1 cent/lb higher because a producer refused to settle with the rest of the market.

Increases nominated for February were in the range of 5–9 cents/lb. That would put BD at 97 cents/lb in February if contracts follow the norm and settle at the lowest nominated price.

But sources said two suppliers on Friday announced they did not intend to match the 97 cents/lb, potentially splitting the US BD market for the fourth time in the last five months.

US BD prices used to settle at the lowest price nominated by the four main US producers, but one of those suppliers broke ranks in September 2010 and split the market for the first time in more than 10 years.

Two other split settlements followed, in December and January, as the same supplier refused to match lower prices proposed by other producers.

February was no different, but the roles were reversed as the settlement process got underway this week.

Market sources said the supplier that had previously split the market three times had now come out with the lowest nomination, which other producers were refusing to match.

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

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

($1 = €0.73)

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By: William Lemos
+1 713 525 2653

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