OUTLOOK ’18: Higher quarterly prices for US BDO on the table

HOUSTON (ICIS)–Higher prices will be the first consideration for the US butanediol (BDO) market in 2018, because of producer nominations that take effect on the first day of the new year.

Buyers have come to expect quarterly increases after six in a row, but that is only a recent phenomenon in the US BDO market.

Before the half-dozen increases came seven straight quarterly price cuts dating back to October 2014. And a little more than two years earlier than that, the market took a dive with six more straight decreases beginning in April 2012.

Even if buyers accept all of the 5 cents/lb proposed separately by BASF, LyondellBasell and Ashland in their latest nominations for 1 January, quarterly BDO prices will remain in the bottom half of the 10-year chart shown below.

None of the producers gave any explanation in their announcements, though market sources expect another round of increases given the tight market in North America. INVISTA’s force majeure remains in place. Ashland is on sales allocation, and BASF’s plant in Louisiana is running at a somewhat reduced rate.

One US producer, INVISTA, has not nominated a Q1 price increase.

A buyer noted that the Q1 nominations came in much smaller than most other price increases in 2017. The last three quarterly hikes in BDO began as double-digit nominations and ended as an 11 cent/lb hike in the second quarter, and for 9 cents/lb each in the third and fourth quarters.

“I just don’t think there’s an appetite for going up again on BDO,” the buyer said, adding that purchasing agents took a real beating with the string of quarterly increases.

US BDO jumped by 41% in price in 2017, after dropping by about 7% in 2016.

Another buyer, who suspects prices will rise again in the first quarter, said the three Q1 price increase nominations either showed restraint or just common sense in their nominations.

“I suspect they were threatened with bodily harm if they did another 10-center,” the buyer chuckled.

Besides supply and production issues, higher BDO prices in Asia have been a big driver behind the rise in US BDO values.

The cost of US and European material remains the highest in the world on a per-dollar basis and more than 20 cents/lb higher than South Korean material, but American BDO buyers said tariffs and shipping costs even the score.

A distributor said Asian BDO prices now are higher than US material when it comes to isotank shipments (20 tonnes). Yet Asian values are not high enough to inspire a wave of American imports as happens every few years in the US polypropylene or methanol markets.

“At some point it’s going to have to normalise,” the buyer said of global BDO prices. “I would think that prices would have to come down in Asia.”