Oct US BD settles at 46 cents/lb, up 3.3 cents, on Asian pricing

01 October 2013 16:27  [Source: ICIS news]

Oct US BD settles at 46 cents/lb, up 3.3 cents, on Asian pricingHOUSTON (ICIS)--The October US butadiene (BD) contract among the three major producers settled at 46 cents/lb ($1,014/tonne, €750/tonne), a rise of 3.3 cents/lb from 42.7 cents/lb in September, sources said on Tuesday.

A fourth producer, which accounts for about 15% of the market, set its monthly contract price at 49 cents/lb.

October marks the first month that there has been one price for the three main producers since July, as both August and September saw split settlements. The weighted average, which includes all four main US producers, for October is 46.54 cents/lb, up from 43.02 cents/lb in September.

The primary argument from producers for raising prices is the recent run up in prices in Asia.

But domestic buyers initially pushed back on the proposed price increases, saying that the Asian price hikes are unsustainable given the forecast for fundamental long-term weak demand from the replacement-tyre market, BD's most important downstream outlet.

Furthermore, buyers argued that any recent increases in prices are the result of trade speculation, as well as significantly reduced operating capacities by both BD and styrene-butadiene-rubber (SBR) producers.

Market sources have said that cutting capacities will only result in minor price increases in the short term, but will eventually wane given the dismal prospects for demand for the rest of the year and into the first quarter of 2014.

Indeed, tyre makers have significantly cut operating rates and even shut down some production lines through the fourth quarter of 2013. Some tyre makers are considering extending those reduced operating rates into the first quarter of 2014, sources said.

The primary concern for the BD, SBR and replacement-tyre markets, sources said, is a lack of solid macroeconomic fundamentals - job growth, improved GDP, consumer confidence - in the developed markets. Without those key economic drivers, sources said there is no support for replacement-tyre sales, which tend to come from consumers' discretionary income.

Major US producers of BD include ExxonMobil, LyondellBasell, Shell and TPC Group.

($1 = €0.74)


Author: Mark Yost



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