N America Q2 BDO contract talks leaning toward a rollover

23 April 2013 23:23  [Source: ICIS news]

HOUSTON (ICIS)--North American butanediol (BDO) contract negotiations for the second quarter appear headed for a rollover, sources said on Tuesday.

One producer has negotiated all but a few contracts at a rollover and another one initiated talks taking the rollover approach.

Although there is no final settlement, market participants contacted have all suggested that their negotiations will likely end in a rollover of the values negotiated for the first quarter of the year.

Producers have been encouraged by tightening supply in the US, while buyers contend that the trend in raw material prices does not support an increase in Q2 contracts.

BDO markets are perceived to be more balanced. Buyers said that there are no suppliers knocking at their doors to place more material, as happened in past months.

However, buyers also suspect that the tightness is the result of suppliers running their plants at reduced capacity to avoid oversupply.

“Looking at raw material costs, Q2 negotiations should result in a rollover or slight discount,” a large buyer said.

Another one said that the increases nominated for Q2 contracts were simply a defensive move by producers, devised to avoid further price erosion.

External factors also appear to be bearish. BDO prices in Asia have remained at much lower levels than those of Europe or the US and operating rates in that region remain very low, in some cases, around 50%.

North American Q1 BDO contracts settled in the range of 128-143 cents/lb ($2,822-3,153/tonne, €2,173-2,428/tonne) – a 4 cents/lb discount from Q4 2012, according to ICIS data.

($1 = €0.77)

By: George Martin
+1 713 525 2653

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