US BD contracts for Feb rise 12-16% in split settlement

31 January 2012 22:20  [Source: ICIS news]

US BD risesHOUSTON (ICIS)--US butadiene (BD) contracts will rise by 12-16% in February under a settlement that left the market split with a price of $1.18/lb ($2,601/tonne, €1,978/tonne) and $1.30/lb, market sources said on Tuesday.

The split settlement followed nominations for increases of 13-25 cents/lb by the four US producers that participate in the settlement process.

According to sources, two producers nominated a 13 cent/lb increase, while the two other suppliers sought increases of 18 and 25 cents/lb.

The two 13 cent/lb initiatives, both of which put February BD at $1.18/lb, were based on a contract price of $1.05/lb for January.

The other two initiatives, one of which was based on a January price of $1.12/lb, took the remaining contracts to $1.30/lb.

However, sources said one of the suppliers that nominated $1.30/lb agreed to match the lower price, leaving the market split with three producers at $1.18/lb and a fourth supplier at $1.30/lb.

US BD contract prices had been widely expected to increase in February, extending gains from January on support from surging prices in other regions, particularly Asia.

Limited BD supply was also said to be fuelling the increase, as two US producers are on allocation in January, restricting BD deliveries at 85-90%, according to market participants.

The lack of availability combined with the uptrend in Europe and Asia outweighed what has been a slow demand recovery from the fourth quarter.

US buyers had predicted BD increases of 5-15 cents/lb for next month, warning that a substantial jump in February could potentially destroy demand downstream.

Market sources said BD demand in the US has picked up in January, compared with the fourth quarter of 2011, but consumption still remained below the levels of January 2011.

BD producers in North America include ExxonMobil, LyondellBasell, Shell and TPC Group. Buyers include Ashland, Invista, LANXESS, Michelin and Negromex.

($1 = €0.76)

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By: William Lemos
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