30 January 2012 10:19 [Source: ICIS news]
LONDON (ICIS)--Negotiations for European February toluene contracts are set to begin this week, with many in the market expecting talks to be difficult due to the ongoing lack of liquidity in the spot market and bullish selling indications, sources said on Monday.
January contracts were confirmed at $1,060–1,075/tonne (€806–817/tonne) earlier this month on a free on board (FOB) northwest Europe (NWE) basis, up from the previous month by as much as $30/tonne in some cases, although some players had expected larger increases in line with firmer global markets.
However, ongoing tightness outside of contractual volumes helped push the market up as January progressed, with bids climbing up to $1,125/tonne mid-month and sellers moving offers as high as $1,175/tonne.
There was an unconfirmed deal heard at $1,136/tonne FOB Stanlow, which one supplier estimated to be worth around $1,175/tonne on a CIF (cost, insurance and freight) Rotterdam basis.
There has been less material available on the merchant market since the start-up of several derivative plants in eastern Europe in 2011. Spot activity has remained quiet for the most part, but the restricted availability has led to high prices for the occasional spot parcel bought to cover any shortness.
Firmer prices in both Asia and the US are also keeping some upward pressure on the domestic market.
“With the US market still above $4/gal, this means that European numbers have to stay above $1,170/tonne in order to keep the arbitrage window closed,” said one producer.
As sellers kept offers at $1,200/tonne and above towards the end of January, buyers have been unwilling to follow them upwards and activity has been scarce.
“The sellers are positioning themselves ahead of the contract negotiation process,” said one trader last week.
While buyers concede that some upward movement for February is inevitable, they argue that the $1,200/tonne mark is too high.
“These will be difficult talks for customers,” said one major European consumer.
($1 = €0.76)
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