US Nov BD falls to $1.15/lb, 1st single settlement in 8 months

31 October 2011 16:38  [Source: ICIS news]

Butadiene contract falls(adds paragraphs 2-17)

HOUSTON (ICIS)--US butadiene (BD) contracts for November fell on average by 18% in the first single settlement for the US contract in eight months, market sources said on Monday.

The reduction to $1.15/lb ($2,535/tonne, €1,800/tonne) marks a return to the way US BD used to settle, with the four main producers agreeing to match the lowest price nominated for the month.

The last time BD settled at a single price in the US was in March 2011, when contracts rose by 5 cents/lb to $1.04/lb FOB (free on board) USG (US Gulf). 

In September 2010, a producer did not match nominations from two other suppliers, ushering in a series of split settlements for US BD contracts.

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

Prior to 2010, there were only two split BD settlements going back to 1994.

Initial US November BD nominations by three producers were for reductions of 15–20 cents/lb, but those initiatives were outstripped last week after a fourth supplier stepped out with a proposed drop of 25 cents/lb.

October BD was split, with most contracts agreed to at $1.40/lb, down by 30 cents/lb from September. One producer in October settled at $1.45/lb, a price that does not include discounts or premiums.

The drop for US BD in November is the third in as many months.

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

Global markets are trending downwards and buyers are expecting further reductions, a US consumer said.

BD prices in Europe and Asia have dropped sharply since July, partly erasing gains from the first half of 2011 when international BD prices soared to record highs.

Spot prices in northeast Asia were assessed last week at $1,900–2,000/tonne CFR (cost and freight), down by more than half from a peak of $4,300/tonne in July.

In Europe, the monthly contract for November was agreed to at €1,850/tonne FD (free delivered) NWE (northwest Europe), down by €250/tonne from October. The reduction in November followed a €300/tonne slump in October and a €125/tonne drop in September.

BD spot prices in Europe were assessed last week at $1,600–1,700/tonne FOB ARA (Amsterdam, Rotterdam, Antwerp).

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

US BD producers include ExxonMobil, INEOS, LyondellBasell, Shell and TPC Group.

($1 = €0.71)

For more on BD visit ICIS chemical intelligence

By: William Lemos
+1 713 525 2653

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