Europe second-quarter BDO rises by €200/t to €2,050-2,100/t

19 April 2011 23:59  [Source: ICIS news]

LONDON (ICIS)--Second-quarter European butanediol (BDO) contract prices have increased by €200/tonne ($286/tonne) from the previous quarter on the back of healthy global demand, uncertainty over feedstock costs and limited supply, market sources said on Tuesday.

Targeted price increases were achieved across the industry, with second-quarter contract prices assessed at €2,050-2,100/tonne FD (free delivered) NWE (northwest Europe).

“We settled all our contracts at plus €200/tonne, without exception – some at even more, as they started from a lower base,” said one major European producer.

A buyer said: “It’s not very nice as a buyer. If you want the product in the second quarter, it’s going to be with a €200/tonne increase.”

Buyers understood that demand was healthy and that volumes were limited, but said that the extent of the price hikes was unreasonable.

“Is it acceptable? No. Is it fair? No. But [sellers] were all very consistent, all came with the same prices. It’s very frustrating because you don’t know why it’s going up by €200/tonne,” the buyer said.

“The sellers are being opportunistic. There is no rationale behind this increase. It’s killing the business,” the buyer added.

Buyers said they were able to obtain the material they required, but volumes out of contract were difficult to secure. Imports from Asia were also limited, as buying interest in the region remained robust.

According to sellers, strong demand and volatility in crude prices and other raw materials, such as methanol and natural gas, as well as energy costs, led to the €200/tonne quarterly increase in prices.

“Demand continues to be strong, then there’s crude oilit’s an uncertain time and we have limited supply,” a seller said.

Producers also spoke of the continued pressure on operating margins. Demand was said to have increased by 5-6% from last year’s levels, and suppliers said there are now insufficient volumes in the market to meet consumption.

“We are seeing good demand from all downstream sectors. Polybutylene terephthalate [PBT], polyurethane [PU] and fibre producers are all running at high utilisation. The construction industry will also be pulling material from the market through the quarter,” a seller said.

BDO and its derivatives, tetrahydrofuran (THF) and PBT, were tight, exerting availability constraints along the supply chain.

“Some customers are asking for more and we are having to say no, and having to be very careful with our stock,” another BDO seller said.

However, a buyer who admitted that offtake was healthy said: “Demand is at a high level but not at its maximum, and I have no trouble getting material. I feel very strongly that producers are wrongly manipulating the market.”

BDO is used industrially as a solvent and in the manufacture of some types of plastics, elastic fibres and polyurethanes. Almost half of it is dehydrated to THF to make fibres such as elastane (or spandex).

($1 = €0.70)

For more on butanediol visit ICIS chemical intelligence

By: Helena Strathearn
+44 208 652 3214

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