Butadiene set for $1.36/lb in August

Firm demand and tight supply support price hikes

by Tom Stundza -- Purchasing, 7/23/2008 10:50:00 AM

Butadiene has jumped from an average 92¢/lb in May and June to $1.29 in July in a market characterized by firm demand and tight supply. Some buyers expect additional increases on August buys by as much as 7¢.

Butadiene is an important industrial chemical used as a monomer in the production of synthetic rubber. Production of the chemical in June was 11.2 million lbs/day, an increase of 4.6% from 10.7 million lbs/day in May. Meanwhile, butadiene inventories in June were estimated at 189 million lbs, according to subscription news service ICISpricing.com, which compares with 174 million lbs in May and 183 million lbs in June 2007.

Despite prospects of a small gain in summertime output, market participants expect prices to remain on an upward trend through most of the second half, particularly in September/October when there are scheduled maintenance stoppages. One source predicted to ICISpricing.com that world butadiene output could drop this autumn by as much as 10% from the check-up turnarounds.