US BD strength a worry to SBR market – producer

31 March 2011 02:30  [Source: ICIS news]

HOUSTON (ICIS)--Just as US styrene butadiene rubber (SBR) suppliers were beginning to enjoy an increase in demand, a new worry in the form of rocketing feedstock butadiene (BD) prices is beginning to surface, an SBR producer said on Thursday.

Three producers nominated an increase in April US BD settlement values of 17 cents/lb ($375/tonne, €266/tonne), and a fourth producer nominated an increase of 21 cents/lb. The March settlement was $1.04/lb.

Generally, the monthly BD contract will settle at the lowest nomination. However, with BD split settlements becoming increasingly common since last September, a BD producer is said to expect another one in April.

It was heard, but not confirmed, that April BD settled at $1.21/lb for three producers and at $1.23/lb for the fourth producer.

The prospect of a 20% increase in feedstock BD costs to the $1.20s/lb was daunting enough to SBR producers, but BD prices are expected to go even higher in the coming months, a BD producer said. Domestic BD spot prices are about 20-plus cents/lb over the March contract.

“We’re going to be seeing higher prices for some time. All the things that drive BD prices higher – high demand, low supply, a lack of C4 availability and high crude oil prices – are coming into play right now,” the BD producer said.

The dilemma for SBR producers is that while demand was up about 20% in the first quarter of 2011 from 2010 levels, it was not certain if they could pass on feedstock-driven increases without sacrificing demand.

“That’s the big question right now,” an SBR producer said. “Demand is likely to remain firm in April, but further down the road, we could see some demand destruction.”

US Gulf (USG) March 1502 non-oil grade SBR contract prices are 124-131 cents/lb, FOB (free on board), as assessed by ICIS.

North American SBR suppliers include Goodyear, International Specialty Products (ISP), Lion Copolymer and Negromex.

($1 = €0.71)

For more on styrene butadiene rubber, visit ICIS chemical intelligence

By: Gene Lockard
1 713 525 2653

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