Europe BDO Q2 contract negotiations in the early stages

26 March 2013 13:41  [Source: ICIS news]

Tough pricing talksLONDON (ICIS)--European butanediol (BDO) second-quarter contract negotiations are in the early stages and producers and consumers are not expecting a prompt settlement, sources said on Tuesday.

A major producer said it is looking to increase its prices, adding that it had been in the “first discussions” with its sales team.

“We are holding our breath for propylene, but [BDO] demand is OK under the circumstances,” the producer said.

“There is room for an increase. From the end of quarter four to quarter one it was not easy, but supply and demand is balanced and operating rates are better. In tough times you need to have a reasonable discussion and I am going to ask for an increase,” the producer added.

The first-quarter BDO contract was agreed at €2,060-2,110/tonne ($2,641-2,705/tonne) FD (free delivered) NWE (northwest Europe), down by €30/tonne.

Major producer BASF announced in early March that it was targeting an €80/tonne price increase from 1 April on strong demand, higher costs and pressured margins.

Customers said that while they recognise the need for producers to increase margin, they, too, are being squeezed and the success of any price announcement would very much depend on demand.

“If demand’s not there, there’s no room for a price increase,” said one buyer.

A second buyer said: “Suppliers are unhappy because of margins. I don’t see any tightness and the market still feels fairly depressed.”

However, the buyer said that if “real” downstream demand picks up and the European market tightens, second-quarter prices may firm “a little bit”. 

Meanwhile, in the US, second-quarter negotiations are under way. Two US producers announced that they are seeking second-quarter price increases of 4-6 cents/lb, depending on grade. Producers are attempting to improve their margin.

US buyers have yet to voice their price intentions.

In Asia, sentiment remains downbeat and BDO operating rates in the key China market are around 50-60% of capacity.

Major BDO derivatives are polybutylene terephthalate (PBT) and THF. BDO is also used in polyurethanes (PU), fibres coatings, elastomers and foam sectors. 

($1 = €0.78)

By: Julia Meehan
+44 20 8652 3214

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