Europe Q2 BDO contract negotiations progressing slowly

16 April 2013 16:25  [Source: ICIS news]

LONDON (ICIS)--European butanediol (BDO) second-quarter contract price negotiations are progressing slowly and major contracts have not yet been agreed, sources said on Tuesday.

“We are moving very slowly because there is a different perception in the market and there is conflicting information,” a major buyer said in relation to the progress of its quarterly contract price discussions.

“On one side you have the downstream economy which is really weak and it’s not improving from the US and Asia. We were not in a good position before and now there are other reasons why it’s not so good.”

Crude oil prices dropped to their lowest level since July 2012, falling below $100/bbl (€77/bbl) because of concerns over the impact of slowing economic growth in China on global oil demand. The US economy is also under pressure following disappointing US unemployment and retail data.

While major BDO contract partners say they are still discussing contracts, some smaller consumers said that they have settled at some accounts. One said: “Our negotiations are 75% complete which means some negotiations are still open.”

The buyer said it achieved a reduction to €20/tonne, but it had also rolled over some contracts.

In the coatings sector, where demand has suffered because of below average temperatures across Europe, a buyer said its suppliers told him that increases of €30-40/tonne had been agreed. However, the buyer said it was difficult to pass such an increase onto its customers.

“I have not yet concluded, but my suppliers still indicate a price increase of about €30-40/tonne and tell me they have closed at this level. So far I only have one customer where I can apply €30/tonne.”

“These increases are margin driven. In terms of availability I can get all I want,” the buyer added.

While there is still conflicting news in relation to contract settlements, most sources describe the European market as balanced. In relation to its demand, a major buyer said: “We are roughly the same as 2012.”

A major producer also saw the market as balanced, with its demand as expected. However, it was still pushing for a price increase.

“The situation in terms of time and progress - not everything is closed. This round [of negotiations] is taking a little bit of time. I would say the market is balanced and volumes seem to be there,” the producer said.

“It’s really mixed and not an easy round to accommodate. Despite the mixed news, the basic rhythm of the market is not that bad. I would say that my comments are tinged with slightly more optimism,” the producer added.

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

Key BDO derivatives include polybutylene terephthalate (PBT). BDO is also used in the polyurethanes (PU), fibre coatings, elastomers and foam sectors.

($1 = €0.77)


By: Julia Meehan
+44 20 8652 3214



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