US February BD splits, market restructure takes hold

01 February 2011 17:16  [Source: ICIS news]

US Feb BD contracts were splitHOUSTON (ICIS)--The US butadiene (BD) market ended up with yet another split settlement in February after three producers refused to settle at the lowest contract nomination for the month, market sources said on Tuesday.

According to sources, the three suppliers settled at 99 cents/lb ($2,183/tonne, €1,594/tonne), which was the second-lowest nomination for February but still represented a jump of nearly 9% from January.

A fourth supplier settled at 97 cents/lb, marking the lowest proposed increase.

The split settlement in February was the fourth in the past six months.

BD prices nominated for February were in the range of 97 cents/lb and $1.00/lb, which represented increases of 5-9 cents/lb and would have put BD at 97 cents/lb, had the market followed the norm.

But sources said three suppliers ignored the lowest nomination, putting contracts at 97 cents/lb and 99 cents/lb.

US BD prices traditionally settled 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 the other producers.

February was no different, but this time the roles were reversed.

Market sources said the supplier that had previously split the market three times had come out with the lowest nomination, which the three other producers refused to follow.

The recent string of split settlements could point to a possible new era in the US BD settlement process, where each supplier may begin to individually negotiate prices with its consumers.

The uptrend in the US BD market is also likely to continue as demand remains firm, supply is tight and spot prices keep rising, a market participant said.

BD spot prices were assessed at $1.10-1.15/lb last week, up from 90-95 cents/lb four weeks earlier.

BD contracts in March could rise by another 3-5 cents/lb, the source said.

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