First US Feb BD nomination emerges at 6 cent/lb drop

HOUSTON (ICIS)–US butadiene (BD) contracts for February have been nominated by one producer at a decrease of 6 cents/lb, market sources said on Wednesday.

If accepted by buyers, the nomination would put February contracts for that producer at 37 cents/lb, down from 43 cents/lb in January.

The initial nomination was in line with market expectations that contract prices would fall further in February amid currently soft conditions.

Supply remains long, and demand continues to be viewed as lacklustre.

Additionally, BD prices in Asia continued to plunge, putting downward pressure on prices in the US.

While the differential between Asia and US prices is not wide enough yet for imports to make sense economically, market sources said that it did allow for an arbitrage to open up for derivatives such as synthetic rubber.

“North American producers need to act more aggressively to close the derivative arbitrage,” a BD consumer in the non-rubber market said. “BD imports aren’t coming in because no one’s buying. But with the cost difference, rubber producers can make rubber in Europe and Asia and import to US.”

Other sources said that February contracts would need to drop by 3-6 cents/lb in order for the US market to keep pace with Asia.

No nominations were heard yet from the other three producers.

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