US August BD contracts settle 5-8 cents/lb lower

HOUSTON (ICIS)–US butadiene (BD) contract prices for August settled on Friday at decreases of 5-8 cents/lb, marking the fourth consecutive month of declines as weak global markets and long domestic supply continues to weigh on values.

The settlement puts August BD contract prices at a range of 37-40 cents/lb ($816-882/tonne).

The ICIS contract reference point for August is at 39.25 cents/lb, down from 45.00 cents/lb in July.

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 has kept pressure on the US market since March.

Spot prices in Asia have fallen by about $2,000/tonne, and the outlook continues to be soft due to expected imports and lower prices in China.

Contract prices in Europe have fallen by about €1,000/tonne and reached a 10-month low for August contracts this week.

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.