Butadiene spot prices are moving higher

Some suppliers have buyers on allocation

By Tom Stundza -- Purchasing, 2/27/2008 11:20:00 AM

Spot prices for butadiene have jumped 11¢ to 69¢/lb for early March deliveries because planned and unplanned outages have led to short-term supply shortages. Indeed, “buyers are bracing for possible further hikes in March,” says subscription news service ICISpricing.com, since contract prices may rise from 61¢ in February to 65¢ in March. But, “given the tight supply situation, there is little material available for spot transactions.”

Dow Chemical’s 2.2 billion lb/year St. Charles olefins II cracker in Louisiana has been off-line over the last two weeks due to mechanical damage from a safety flare associated with the unit. And there have been other production cutbacks lately across the Gulf Coast.

Butadiene is an important feedstock in the production of synthetic rubber. It is produced as a byproduct of the steam cracking process used to produce ethylene and other olefin chemicals. News reports indicate that several butadiene producers have allocation programs in place because of the reduced supply situation, which isn’t expected to change until the end of March.

The allocations aren’t anticipated to be lifted until stocks start to be replenished at the beginning of the second quarter, market sources tell ICISpricing.com. But that may not happen that soon since Chevron Phillips Chemical is scheduled to take its Port Arthur cracker in Texas down for 45 days, starting a maintenance turnaround at the end of March. The unit makes 1.7 billion lb/year.

Downstream, styrene butadiene rubber (SBR) buyers are likely to see higher prices as the butadiene feedstock and energy prices continued to climb. In fact, SBR producers have proposed 6¢/lb spot price increases for March. SBR production units are running at trimmed rates due to the reduced availability of the butadiene feedstock.