US Oct BD rise in first single settlement since '11

29 September 2016 23:05 Source:ICIS News

tyreFocus story by Tracy Dang

HOUSTON (ICIS)--US butadiene (BD) contracts for October have fully settled higher at 46 cents/lb ($1,014/tonne), marking the first single-priced settlement in nearly five years.

Market sources said that the October settlement reflects a 2 cent/lb increase in apparent market movement amid remaining tightness in domestic supply, further supported by an uptrend in global prices.

“It’s still a little tight in the US,” a buyer said. “Asia also seems to be going up, so that is also keeping prices up.”

In the previous month, three producers had separately settled their September contracts at 44 cents/lb.

A fourth producer had settled its September contracts at 39 cents/lb. For that producer, the October contract price of 46 cents/lb includes a 2 cent/lb increase reflecting market movement, as well as a 5 cent/lb increase representing overall aggregated fees that used to be added to the announced price.

The producer is changing its pricing structure, in which the higher announced price already includes any former aggregated fees and will not have extra adders on the announced price.

There has been a push for US BD producers to change their individual pricing structures, in which contract prices do not have aggregated fees added to the announced prices. This enables the US BD market to be more transparent – not only in the global BD market, but also in the domestic downstream markets.

For years, one producer has settled contracts on a transacted price with no additional adders. In August, another producer changed its pricing structure and settled contracts at a price that did not have aggregated fees or premiums added to the announced price. A different producer made a similar move in September, although it is unclear whether that producer’s announced price includes all adders.

With the last producer making the transition for October contracts, it will be the first month that the US BD industry has seen all contracts individually settle at the same announced price since November 2011, when contract prices were separately agreed at $1.15/lb.

Despite early expectations that October contracts would roll over or rise slightly from September, sources said that the 2 cent/lb increase in apparent market movement was in in line, given remaining snugness in domestic supply and the uptrend in global prices.

Although most US BD production unit issues have been resolved, ongoing cracker downtime from planned turnarounds and unexpected outages are limiting the availability of many products, including BD.

“There’s not a whole lot of spot available,” a producer said. “Supply is still tight. Europe is pretty tight. Demand is still steady.”

Nevertheless, some market participants continue to seek spot volumes from the domestic and European markets.

“I think a few companies are looking,” another supplier said.

Meanwhile, BD prices in Asia continue to strengthen amid ongoing tight supply in that region.

Additionally, European October BD contracts settled late last week at an increase of €40/tonne.

“Asia and Europe continuing up certainly helps support [this] move,” a buyer said.

US BD contract prices have been on a general uptrend since the February-March timeframe.

In February and March, contract prices had separately settled at 24 cents/lb for two producers and 25 cents/lb for another producer. Those published prices did not include premiums or aggregated fees, which were confidential and based on individual contract terms. A fourth producer had settled contracts at 29 cents/lb, which was said to be a transacted price.


The ICIS methodology recognises the majority of the market as being the assessment basis for the published contract price, which has kept the outlier out of the range.

The October settlement includes all the announced prices of all four producers, as there were no outliers.

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

BD is used to make the rubber in tyres (Source: Hone/LAT/REX/Shutterstock)

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By Tracy Dang