Europe Q2 BDO contract prices rise on firm feedstocks

24 April 2012 23:59  [Source: ICIS news]

LONDON (ICIS)--Second-quarter European butanediol (BDO) contract prices have increased by €80/tonne ($105/tonne) from the previous quarter on firm feedstock costs, improved demand, lower inventories and the need to sustain margins, market sources said on Tuesday.

Contracts for the quarter were assessed at €2,200-2,240/tonne FD (free delivered) NWE (northwest Europe).

“Negotiations have been intense as both sides are under a lot of pressure," said one producer that was halfway through its discussions.

A buyer said, “The market is slow to settle as there is a disagreement on the size of the price increase.”

Nevertheless, most buying and selling sources confirmed that contracts had now concluded.

Market participants said contracts had largely settled at €2,200/tonne FD NWE, with the majority of settlements concluding at an increase of €80/tonne above first-quarter levels. Increases were also widely heard at €70/tonne, and up to €100/tonne, while a minority settled with hikes of €50/tonne and below, depending on starting point.

Producers stressed that increased raw material costs have put upward price pressure on the market. Feedstock propylene and methanol contract prices have firmed since the beginning of the year. 

“Raw material costs are unpredictable, and they are becoming a burden,” one producer said. “The feedstock costs are eating into the margins of producers.”

However, buyers strongly resisted the proposed increases. Producers had initially targeted hikes of €125-140/tonne.

“BDO suppliers are having a very good time. Their profit margins are very good, and they are making a huge pile of money,” a buyer said. 

Another buyer said prices are already at a high level and that prices in the second quarter should roll over as demand is not particularly strong, and there is no difficulty in securing material.

BDO is used industrially as a solvent and in the manufacture of some types of plastics, elastic fibres and polyurethanes. Almost half of it is dehydrated to tetrahydrofuran (THF) to make fibres such as elastane (or spandex).

($1 = €0.76)

By: Helena Strathearn
+44 208 652 3214

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