Europe to Asia toluene arb. open but difficult

20 March 2008 18:43  [Source: ICIS news]

LONDON (ICIS news)--With European spot toluene trading $100-110 /tonne (€64-70/tonne) lower than Asia on Thursday, traders were unsure if arbitrage would be workable given current market volatility.

“Freight to inland Asia would be about $80/tonne,” said one trader.

“And there is a $100/tonne differential, but at the same time, shipping to Asia requires [a lot more time] than it does in Europe, and prices are changing all the time,” the trader continued. “Asia may have closed high but it will likely come down on crude tomorrow.”

Another trader was more positive in his assessment.

“The numbers work to both Asia and the US, and if you are brave enough to risk it, then why not?”  The same trader, however, foresaw options to the US as becoming greater in the coming weeks.

“The US is balanced at the moment, but we expect more demand in April [prior to the US driving season],” he said.  “ If the US starts to pick up it could well cause a draw from Europe.”

Toluene closed at $1,000-1,010/tonne FOB (free on board) Korea on Thursday, whilst two deals seen for March loading material were done in Europe for $900/tonne FOB Rotterdam.

This spread of $100-110/tonne was sufficient to yield profitable arbitrage options, players said.  But, as toluene was currently in thrall to fluctuations in upstream gasoline, itself linked to crude movements, the market was extremely volatile. 

($1 = €0.64)

By: Peter Salisbury
+44 20 8652 3214

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