Initial US August BD contract nominated at 8 cent/lb decline

20 July 2017 16:20 Source:ICIS News

small tyreFocus article by Jessie Waldheim

HOUSTON (ICIS)--US butadiene contract prices for August have been nominated by a producer at an 8 cent/lb decline, sources said on Thursday.

If accepted by buyers, the nomination would put the producer's August contract price at 37 cents/lb ($816/tonne), about an 18% decline from 45 cents/lb in July.

Weak global prices and domestic length have kept pressure on the US BD market, leading to expectations of drop for August contract prices.

"That's maybe down a little bit more than I expected, but not all that surprising," one market source said.

Other sources had expressed surprise.

"I was expecting they would go for the 40-42 cents/lb range," a buyer said.

Contract prices have dropped by 65 cents/lb since reaching a multi-year high of 110 cents/lb in March, as lengthening domestic supply and falling global prices have pressured the market.

Domestic supply began to lengthen in the second quarter as earlier production issues were resolved and as downstream outages began in late March. One derivative plant restarted in June after a turnaround. Another, which was shut down in late March and sold in June, remains closed.

Supply was further bolstered by increases to olefins capacity in the US Gulf, through both new and expanded crackers. The trend is expected to continue, with several new crackers expected to come online in the second half of 2017.

Meanwhile, a decline in global BD prices further pressured the US market. Since March, spot prices in Asia have fallen by about $2,000/tonne, and contract prices contract prices in Europe have fallen by about €925/tonne.

A late June rebound in Asia led to expectations that the global market could stabilise or strengthen. However, that rebound stalled in July, and the outlook in the region has weakened due to incoming shipments, some of which were sent from the US.  

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. 

In cents/lb

Aug Nom

Jul Settle

Producer 1

37

45

Producer 2

TBD

45

Producer 3

TBD

45

Producer 4

TBD

45

 

By Jessie Waldheim