Price and market trends: US BD producers propose higher prices for March

01 March 2013 16:35  [Source: ICB]

If increases hold firm, March would mark the first price increases for US butadiene since November 2012

Two butadiene (BD) producers stepped out with nominations on 22 February of 8 cents/lb and 10 cents/lb, respectively, outpacing a rival supplier who had nominated a price increase of 3 cents/lb.

 
Market sources cited higher prices in other regions as a driver behind the proposed increases.

Three US BD producers settled February at 76 cents/lb, while a fourth producer settled its contracts at 83 cents/lb. US BD contracts normally settle at the end of the month for the following month.

Sentiment about the proposed 3 cent/lb increase was mixed, with two market participants saying the nomination was low, based on a recent run-up in Asian prices. BD prices in Asia were flat in the week ending 24 February, but spot prices have racked up 24% in gains since the start of the year to $2,050/tonne CFR (cost and freight) NE (northeast) Asia, underpinning upward movement in Europe and the US.

SPECULATIVE ASIA TRADES
The increase in Asia, however, has been largely driven by speculative trades, not firmer end-user demand, as downstream rubber plants have been operating at reduced capacity, sources said.

Momentum in Asia is stalling, and one market source speculated it was likely to erode support for a contract increase in the US. But others had argued that US producers could make the case for the increases as higher prices in other regions tend to lend support to the typically net-short US market.

If these nominations hold firm, March would mark the first price increases since November 2012, as BD contracts settled flat for the past three months on lacklustre demand in markets such as the key styrene butadiene rubber (SBR) sector.

Whatever the outcome of next month's settlement, BD prices in the US will continue to trail those from a year earlier, as the monthly contract settled at $1.45/lb in March 2012, just off its peak of $1.55/lb for the entire year.

US BD prices rose sharply in the first few months of 2012 on constrained supply as a result of a busy cracker turnaround season in the US early last year.

Additional reporting by Mark Yost


By: William Lemos
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