First US Sep BD nomination at higher-than-expected hike

22 August 2016 23:32 Source:ICIS News

HOUSTON (ICIS)--US butadiene (BD) contracts for September were nominated on Monday by one producer at a price rise of 4 cents/lb, leaving some market participants surprised at the extent of the intended increase.

If accepted by buyers, the nomination would put September contracts for that producer at 45 cents/lb ($992/tonne), up from its August pricing of 41 cents/lb.

For many, the initial nomination called for too great of a price rise, as early expectation had centred around a rollover to a slight increase of a couple of cents/lb.

“I don’t get that number,” a source said. “It is a few cents[/lb] higher than I expected.”

Another source said: “I don’t understand it. I don’t think there’s anything that indicates [an increase of] 4 cents/lb.”

Spot prices have been trending up slowly on what market participants have described as balanced to slightly tight supply, stemming from a couple of unplanned outages.

While demand appears stronger, sources said that there are no supply allocations in place.

Some point to the current uptrend in Asia prices, which tend to influence global BD pricing.

“With Asia going up, [US producers] may be waiting to see if they can increase pricing,” a buyer said.

Other are cautious about whether the Asia uptrend will continue, saying it “seems a little premature to try to ride that coat tail”.

Still, some market participants said that the intended increase had been expected, given the supply situation.

“Domestically, it’s tough to find pounds,” a source said. “With all the issues we’ve had, that’s probably the price level with material from another region.”

Market participants await separate contract nominations from three other US BD producers.


Sep Nom

Aug Settle

Producer 1

To be announced

34 cents/lb*

Producer 2

To be announced

36 cents/lb*

Producer 3

To be announced

41 cents/lb

Producer 4

45 cents/lb

41 cents/lb

*Public prices do not include premiums or aggregated fees, which are confidential and based on individual contract terms.

Additionally, market participants continue to monitor potential changes regarding individual producer’s pricing structure in the US BD industry.

August BD contracts had settled, with two producers at rollovers and one producer at a 1 cent/lb increase. A fourth producer finalised its August contracts at a higher price, but the settlement was considered essentially a rollover from July, as the producer is using a new methodology, in which there are no premiums or aggregated fees added to the announced price.

There has been a push for the industry to move toward an adder-free pricing structure for US BD contract prices to be more transparent.

Market sources said that there is pressure for other producers to change how they announce contract prices, although it remains to be seen how long those individual changes will take.

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

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By Tracy Dang