25 October 2011 23:59 [Source: ICIS news]
LONDON (ICIS)--Fourth-quarter European butanediol (BDO) contract prices have increased by €20-25/tonne ($28-35/tonne) from the previous quarter because of higher feedstock costs and snug availability, market sources said on Tuesday.
Contracts for the quarter were assessed at €2,270–2,325/tonne FD (free delivered) NWE (northwest Europe). Contracts largely settled between rollovers and increases of €20/tonne. Increases of up to €50-80/tonne were heard, but these were not considered representative of the market.
Negotiations have been tough and prolonged this quarter as buyers strongly opposed produers’ initial targets of €100-120/tonne over third-quarter values, because of increased upstream costs, including energy and oil. A buyer said: “These increases are unjustified. Propylene and butadiene (BD) costs have decreased, the euro has been strengthening over the last few weeks and methanol is at the same level as in early 2011, when the BDO market was tighter.”
The buyer added that downstream demand is lower than expected and that it seems to have deteriorated quite rapidly since early October, as users do not want to be left with excess stocks.
“Negotiations were incredibly tough,” a producer said. “We met somewhere in the middle that was somewhat acceptable to both parties.”
Demand is softer now than in September but sources say it is difficult to ascertain the real level of demand, and the degree to which buying interest is being influenced by inventory control and working capital management.
Availability has now improved compared with the third quarter and the market is now balanced. Supply was constrained from the end of May until September because of force majeure on BDO and its derivatives at BASF’s 190,000 tonne/year BDO facility in Ludwigshafen, Germany.
Consumers are able to obtain all the volumes they require. “We are having no difficulty at all to get product here in Europe,” the buyer said.
It is thought that end users will begin their December maintenance turnarounds a little earlier and stronger than usual. Although the market is softening, producers remain optimistic, and see no change to underlying fundamentals in the midterm future.
“Underlying demand is not bad. The underlying macroeconomic trend in the BDO sector is not bad,” a producer said.
Producers also expect healthy demand in the first quarter of 2012. “The industry has so far been growing 6-7% per year. The rebound of BDO has been phenomenal and not lost growth.”
($1 = €0.72)
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