Initial US July BD contract nominated at 14 cent/lb drop

Focus article by Jessie Waldheim

HOUSTON (ICIS)–US butadiene (BD) contract prices for July have been nominated by a producer at a 14 cent/lb decline, market sources said on Friday, amid ample domestic supply and weak global prices.

If accepted by buyers, the nomination would put the producer’s July contract price at 46 cents/lb ($1,014/tonne), 23% lower than in June.

Market participants had expected a decline for July contract prices, due to ample domestic supply and weak global markets.

Contract prices had risen sharply in the first quarter as several domestic production issues had tightened supply. Amid limited domestic availability, surging BD prices in Asia had put additional pressure on the US market.

US contract prices rose to 110 cents/lb in March, more than doubling from the low 50s cents/lb in December.

As production outages were resolved and supply was lengthened by imports and downstream outages, contract prices fell throughout the second quarter. US prices were under additional downward pressure from declines in other regions, particularly in Asia, where BD prices fell sharply.

Domestic supply has remained long with strong production and downstream outages through most of the second quarter.

A US Gulf styrene butadiene rubber (SBR) plant was shuttered in late March. While that plant has been sold, it remains offline.

Additionally, another derivative plant had been down for a turnaround since late March. While that plant has restarted, market source have said that BD supply remains ample.

Global BD prices have also kept pressure on the domestic market.

In Europe, spot prices have fallen as outages in the region have been resolved and as contract prices for July are expected to soften as well.

In Asia, BD prices were in steep decline for several months. While those declines have stalled, prices remain well below those in the US.

“We don’t need any more supply so prices have got to be below [Asia],” one source said.

“North America has two challenges now – protect themselves from synthetic rubber from Asia and protect themselves from BD coming from EU to North America,” another source said.

Market participants await for individual nominations from three other US producers.

US BD contracts typically settle at the end of the month for pricing in the upcoming month.

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