04 August 2008 05:02 [Source: ICIS news]
By Mahua Chakravarty and Susan Yan
SINGAPORE (ICIS news)--A sharp drop in toluene net imports into China, the largest market in Asia, is prompting South Korean sellers to target the domestic market and buyers in southeast (SE) Asia and the US for fresh export avenues, said traders and a producer on Monday.
Asia used to be a net toluene importer until 2007, mainly from the US, with South Korea’s GS Caltex being one of the largest buyers in Asia.
But with China’s steady increase in domestic capacity since 2006, demand for imports have been on the decline. Last year’s total imports at 444,547 tonnes were 24.5% lower than the previous year, according to data from China Customs.
The average monthly import this year is estimated at about 20,000-25,000 tonnes, a drop of about 15,000 tonnes from 2007’s monthly average, said a Japanese trader. But some Chinese importers predict a sharper drop to as low as 10,000-20,000 tonnes/month, with limited recovery expected post-Olympics.
"We have no interest in spot imports now [and] we prefer domestic material with so many new plants in China," said a south China-based importer, who cancelled some of its toluene buy contracts early this year, as it could not agree on the contract formulas with some of its South Korean sellers.
Chinese importers’ monthly toluene contracts this year on average totalled about 16,000-18,000 tonnes, down by 5,000 tonnes from last year.
"They [South Korean sellers] need to move physical cargoes and are offering to SE Asia," the Singapore-based trader added.
SE Asia includes developing countries with the potential for increased use of solvents and gasoline, the two major downstream applications of toluene, a South Korean trader said.
But, that region also had limited demand with regular supplies available from Singapore, Malaysia and Thailand, a Japanese trader noted.
Hence, selling to the US could be the next option for some of these sellers, but so far only a key South Korean producer was expected to export to the US on term basis.
But for some other sellers, rising freight costs could prove to be one of the disincentives.
"We are not looking at the US [and] it’s not a good choice for us," said another South Korean producer, adding that it was selling toluene mainly to local end-users who used toluene as a feedstock via the toluene disproportion (TDP), hydro-dealkylation (HDA) and MTPX processes.
Due to the regional surplus, some sellers in northeast Asia might decide not to extract toluene and rather blend it for gasoline, said a Japanese trader.For more on toluene visit ICIS chemical intelligence
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