Europe toluene resists Asian slump despite weak spot demand

25 March 2013 12:54  [Source: ICIS news]

Europe tolueneLONDON (ICIS)--Despite the recent sharp downturn in Asian toluene pricing, European spot numbers have largely resisted any significant decrease, although activity remains quiet, sources said on Monday.

“Demand is covered by contractual volumes,” said one European seller. “Spot activity is therefore fairly minimal.”

With the US market now below $4.00/gal, there are also no workable export opportunities out of the Amsterdam-Rotterdam-Antwerp (ARA) region.

However, balanced-to-tight availability has kept domestic prices from following the recent decrease in Asia, where oversupply in the key Chinese market saw values drop last week to $1,100/tonne (€847/tonne) FOB (free on board) Korea for April loading and $1,110-1,120/tonne FOB Korea for May cargoes.

“TDI (toluene di-isocyanate) demand is good,” said one major buyer. “There is one producer coming down next month and an extraction unit also offline in April.”

April spot offers were heard at $1,240-1,245/tonne on a CIF basis last week, marginally lower than the March contract level. No firm buying interest was noted, however, with consumers still eyeing the current bearishness in other regions as a yardstick for Europe.

“Netback with the US market is not a good indicator for Europe pricing right now,” countered one trader, who cited balanced availability as the main factor.

There is talk that a shutdown at a hydrodealkylation (HDA) plant could see some material moving out of the Mediterranean, although players agree that it is unlikely to find a home within the ARA region given the current lack of appetite for spot volumes.

Benzene prices in Europe have fallen to a virtual parity with toluene this month because of weaker derivative demand from the styrene and phenol sectors, making HDA production economically unviable.

Conversely, one trader said that up to 6,000 tonnes of material was leaving Europe, which could have an impact on toluene availability in the upcoming month.

While the summer driving season has traditionally seen more interest in toluene from the gasoline blending sector, the wide differential between the two is keeping any spike in demand unfeasible for the moment.

“It’s getting closer, but toluene is still of no interest to blenders with the gap between the two around $200/tonne,” explained one producer, citing a differential of around $70-80/tonne to be reasonable.

April contract negotiations are expected to get under way later this week. One toluene buyer said that the current slump in Asia will be a factor in discussions, but did not see the domestic market moving in a similar fashion.

“Europe won’t follow Asia, but it will have an impact,” the buyer said, adding that it expects the volatility across the wider aromatics sector to be a key driver for April.

($1 = €0.77)

By: Truong Mellor
+44 208 652 3214

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