European BD producer targets March MCP hike of €150-200/tonne

21 February 2013 15:26  [Source: ICIS news]

LONDON (ICIS)--A European butadiene (BD) producer said on Thursday that it is targeting a price increase of €150-200/tonne for the March monthly contract price (MCP), citing high naphtha costs and the approaching cracker turnaround season.

The producer said its February margins were negative, and it expects naphtha prices to remain high for the next couple of weeks. There is also a substantial cracker turnaround season approaching, the source said.

"The potential is there for a strong price increase and margin recovery," the producer said.

The producer said that its customers had emphasised weak demand for BD, but had acknowledged that the market is tighter and production costs have increased.

“Most players were not happy to hear it but not too shocked either," the source said.

A buyer took a different view, saying that the price initiative was completely out of line with the rest of the market.

The buyer said it had been in discussions with other sellers regarding the March MCP. "The phrase used was 'small increase or slight increase'," the buyer said.

The source said that producers had pointed to their higher naphtha costs, but one had admitted that its cracker margins were not too bad.

"The underlying demand picture cannot be strong," the buyer observed, and said that this had been acknowledged by producers.

The buyer also did not feel that the upcoming cracker turnaround season would be particularly heavy.

The source suggested that, in the absence of other justifications, an increase of €35/tonne would be sufficient to cover producers’ increased naphtha costs.

A seller not involved in the MCP negotiations said that the BD market is tightening, and considered that a price of around €1,400/tonne was a possible outcome for March.

The February MCP was rolled over from January at €1,365/tonne FD (free delivered) NWE (northwest Europe).

($1 = €0.75)

By: Samuel Weatherlake
+44 20 8652 3214

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