Second-quarter Europe BDO contract talks continue amid upward pressure

LONDON (ICIS)–Second-quarter contract negotiations in the European butanediol (BDO) market continue this week, with upward pressure on the back of globally tighter supply, rising feedstock prices and healthy demand, sources said.

Two European producers have already announced triple-digit increase targets for the quarter, with producers stating they are staying firm with the announcements.

Sellers continue to cite tight demand in the region and because of this said there is no reason to soften pricing expectations.

However, with the majority of business done under a contractual basis in Europe not all buyers view the market as considerably tight.

Opinion is split on the supply balance, as many buyers are only ordering contracted amounts and as no producer has declared force majeure, contractual agreements have to be fulfilled.

Buyers accept there is less supply in the overall market compared to last year, however they are not as impacted as some buyers in the US who are currently struggling to obtain volumes.

The supply situation in the US is clearer and further progress has been made in the contract negotiations.

However, in Europe buyers continue to state they are receiving what they would expect and because of the differing views on the market some contract talks are making slow progress.   

The reason for the tightness in Europe is linked to one producer carrying out a planned maintenance stop, and a separate producer having production issues that may continue until May, however this is unconfirmed by the producer in question. 

Lower imports have also contributed to the tighter supply situation, linked to firming prices in Asia, where the upward trend in pricing began.

Europe is also seeing less material from the Middle East, with the producer there focusing on captive requirements and increasing downstream polybutylene terephthalate (PBT) production.

Demand also remains at a healthy level, with downstream sectors performing well and continued growth from the automotive sector.

Second-quarter contract talks will continue well into April, with supply and demand, combined with feedstock movements, all playing a part.

First-quarter contract prices settled at €1,550-1,560/tonne, a €40/tonne increase from Q4, on a free delivered (FD) northwest Europe (NWE) basis.

Focus article by Katherine Sale