Europe toluene tightens on arbitrage flows to US

18 August 2008 12:19  [Source: ICIS news]

LONDON (ICIS news)--European toluene supply has tightened and spot values increased $10/tonne (€7/tonne) as traders exploit an arbitrage window to the US, players said on Monday.

A firm offer was heard for a 1,000 tonne lot of toluene at $1,035/tonne FOB (free on board) Rotterdam, with bids pegged at $1,000/tonne FOB Rotterdam, up from a bid and offer range of $990-1,025/tonne at the end of last week.

“The arb was open and still is to an extent, and that helped keep prices up,” a trader source said.

The previous week, a European trader had booked 5,000 tonnes of toluene from ARA (Amsterdam, Rotterdam, Antwerp) to Houston, according to global chemical market intelligence service ICIS pricing. 

The booking had been valued in the mid-$50s/tonne (high €30s/tonne). 

At the same time, enquiries had been heard for shipping for 2,000-3,000 tonnes of toluene from Rotterdam, again to Houston.

US spot toluene had closed at $3.50-3.60/gal FOB US Gulf on Friday, equivalent to $1,064-1,094/tonne FOB Rotterdam. This presented a premium of $29-94/tonne FOB Rotterdam over Europe.

With shipping from Europe into the US valued at $48-54/tonne for 5,000 tonne loads, the higher end of this spread showed the potential for profitably exploiting the window, players said.

The outflow of toluene from Europe was seen as having a firming effect on regional spot values.

“Where toluene is normally at a $30-50/tonne spread over gasoline in the summer months in Europe we are seeing a spread of more like $70/tonne,” said one trader. 

“That pretty much shows how supply is in Europe; production is still low, and export means that there isn’t so much material left out there.”

Gasoline had traded at $961/tonne FOB AR (Amsterdam, Rotterdam), $74/tonne below toluene offers.

($1 = €0.68)

For more on toluene visit ICIS chemical intelligence
To discuss issues facing the chemical industry visit ICIS connect

By: Peter Salisbury
+44 20 8652 3214

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