21 June 2011 16:21 [Source: ICIS news]
LONDON (ICIS)--LyondellBasell is targeting €200/tonne ($286/tonne) increases on third-quarter butanediol (BDO) contracts in Europe as supply tightens and demand remains strong, the Netherlands-based producer said on Tuesday.
“I can confirm we have already concluded some business at this level,” a source from the company said. “Contract negotiations for the third quarter are concluding rapidly as consumers realise that the market is tight,” the source added.
LyondellBasell's subsidiary, Lyondell Chemie Nederland, is Europe’s second largest BDO producer, with an output of 125,000 tonnes/year at its Botlek site.
Global BDO availability is tight and supply has become further constrained since BASF’s declaration of force majeure on BDO on 31 May.
A fire in a precursor plant on 30 May had disrupted the production of the feedstock acetylene, and a company spokesperson said the force majeure is likely to remain in place until the end of August.
A buyer said: “The force majeure has come at a time when the market is already tight. We have some difficult weeks to get through.”
Demand from all sectors is at a very high level and this is exerting additional pressure on the supply chain. BASF declared force majeure on polybutylene terephthalate (PBT) base polymer and compounds on 7 June and reduced output volumes because of limited availability of feedstock BDO.
Expectations for the next quarter are that demand will remain strong. Some derivative producers are likely to reduce their traditional summer breaks from three weeks to two in order to satisfy offtake from end-users.
“Customers are able to compensate for lost volumes but only to a limited extent,” a BDO seller said. “Volumes are drying up and most consumers are having trouble securing third-quarter volumes,” the seller added.
Spot is currently valued at €3,100-3,300/tonne FD (free delivered) NWE (northwest Europe).
Second-quarter European BDO contract prices increased by €200/tonne from the previous quarter on the back of healthy global demand, uncertainty over feedstock costs and limited supply. Targeted price increases were achieved across the industry, with second-quarter contract prices assessed at €2,050-2,100/tonne FD NWE.
($1 = €0.70)
For more on BDO, visit ICIS chemical intelligence
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