Spot Europe BD surges on strong export demand, limited availability

04 February 2011 15:59  [Source: ICIS news]

By Nel Weddle

LONDON (ICIS)--Spot butadiene (BD) prices in Europe have surged by €200/tonne ($274/tonne) or more over the past two weeks because of strong export demand from the US, market sources said on Friday.

Spot deals on the domestic inland market were recorded up at €1,600/tonne FD (free delivered) NWE (northwest Europe), having been at €1,460-1,490/tonne mid-January.

Export prices which had been pegged at around $1,900/tonne FOB (free on board) NWE, were now being discussed as high as $2,200/tonne, although there were unconfirmed reports of a deal done this week at as much as €1,650/tonne FOB NWE, equivalent to $2,260/tonne in US dollar terms.

The February monthly contract price (MCP) recently settled at €1,440/tonne FD NWE. One or two producers who had been aiming for a higher settlement felt their firm stances justified given the widening gap between spot and contract values.

The US market had been in a position to draw volume away from Europe and to some extent Asia, because local supply was being constrained by a number of planned and unplanned problems, while demand was strong.

However, some sources said that the pull from the US was showing signs of slowing, not because of the lack of demand, but because of some terminal constraints and more significantly, the ever higher prices being offered.

Healthy consumption from domestic European consumers as well as a couple of unplanned production outages, meant that spot availability was limited. Traders were competing for these volumes which was also helping to drive up the prices.

Not all European producers were in a position to participate on the spot market largely because of production issues

“We are wishing for more product,” said one producer, while another said: "We would like to deal with such [high] numbers, but we are simply low in stocks,” adding that it was still able to fully manage its contractual obligations.

However one consumer poured scorn on the producers’ comments: “The producers are always saying the export market is much better, but our [contractual] volumes are always plus 5%,”  refering to the plus/minus percentage allowance on contract volumes.

It added that if producers really wanted to take part in the export market then it would only ever receive its minimum volume allowed under contract.

($ = €0.73)

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By: Nel Weddle
+44 20 8652 3214



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