US BD producer proposes 25 cent/lb drop for November

27 October 2011 19:14  [Source: ICIS news]

HOUSTON (ICIS)--A US butadiene (BD) producer nominated a 25 cent/lb ($551/tonne, €397/tonne) reduction for November, undercutting its rival suppliers and slashing its contract price to $1.15/lb next month, market sources said on Thursday.

The proposed reduction outstripped one nomination for a 15 cent/lb reduction and two proposed drops of 20 cents/lb put forward by three other producers in recent days.

The four nominations put BD contracts in November in a range of $1.15–1.25/lb, paving the way for the second sharp reduction in as many months.

Most US contracts fell by 30 cents/lb in October, but the market was split with three US suppliers settling at $1.40/lb and one producer at $1.45/lb, the latter being a price that does not include discounts or premiums.

The downtrend, which began in September - when BD prices fell on average by 3.3% - stems from ample supply and weakening demand for the product.

BD prices have also plummeted in Europe and Asia, reversing gains from the first half of 2011 when global BD prices soared to record highs.

Spot prices in north-east Asia were assessed last week at $2,200–2,250/tonne CFR (cost and freight), down by nearly half from a peak of $4,300/tonne in July.

In Europe, the monthly contract for November was agreed upon this week at €1,850/tonne ($2,569/tonne), down by €250/tonne from October.

The reduction followed a €300/tonne slump in October and a €125/tonne drop in September.

BD spot prices in Europe last week fell by $100/tonne to $1,700–1,900/tonne FOB (free on board).

That is down from an average $4,750/tonne in early July.

The final settlement of the US BD contract in November will depend on how many producers will agree to match the lowest price proposed for the month.

US BD contracts used to settle at the lowest price nominated for the month, but a producer broke ranks in October 2010, ushering in a series of split settlements in the months that followed.

The market has since been mostly split between a group of three producers, which tend to converge to a single price, and a stand-alone fourth supplier that sets its own price.

Major US BD producers include ExxonMobil, LyondellBasell, Shell and TPC Group. Buyers include Ashland, Invista, LANXESS, Michelin and Negromex.

($1 = €0.72)

For more on butadiene visit ICIS chemical intelligence

By: William Lemos
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