US April BD likely to settle at a rollover on Asia uncertainty

22 March 2013 17:00  [Source: ICIS news]

HOUSTON (ICIS)--There have been two US butadiene (BD) April contract nominations for rollover at 84 cents/lb ($1,852/tonne, €1,426/tonne), sources said on Friday.

While market participants are still discussing the final settlement, they expect an April contract price to be negotiated as early as Friday, ahead of the American Fuel & Petroleum Manufacturers (AFPM) annual meeting that kicks off this weekend in San Antonio, Texas.

Some buyers are arguing for a decline of up to 2 cents/lb, but the consensus seems to be to hold prices steady. Buyers and sellers both agree that no one is sure about the fundamental weakness of the Asian market.

For the sake of price stability, market participants said they would rather keep the price at 84 cents/lb for April while they get a clearer picture of what is going on in Asia.

There is also the spectre of Asian BD coming to the US. One US buyer has heard of spot deals being done in the $1,500/tonne range, which would mean Asian producers could bring BD to the US for about $1,650/tonne delivered.

Ongoing weakness in the Asian BD market and tight supply in Europe has already led some European traders to look at importing Asian BD, market sources said.

“I have had two proposals from traders [for Asian tonnes],” a major European consumer said.

“Asian sellers are looking at exporting BD [to either Europe or US],” a trader said.

A second trader said it had been eyeing the possibility of exporting Asian volume, but that there was “nothing concrete yet”.

Europe is traditionally an exporter of BD to Asia and the US, but a combination of factors such as reduced cracker rates, light feedstock cracking and a series of unplanned and upcoming planned outages have restricted supply.

The US BD contract price peaked in March at 84 cents/lb. From December 2012 to February 2013 US BD held steady at 76 cents/lb. The last time the US BD contract price was above 84 cent/lb was in August 2012 when it was 90 cents/lb.

“There had been a thought that BD would rise steadily through the year and get back above one dollar per pound,” one market source said. “But given the market fundamentals in Asia and weakness elsewhere, I think no one now expects that to happen. At least not in 2013.”

The last time the US BD contract price was above $1/lb was in June 2012, when it was $1.07/lb.

The major producers of US BD are ExxonMobil, LyondellBasell, Shell and TPC.

($1 = €0.77)

By: Mark Yost
+1 713 525 2653

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