29 April 2013 11:12 [Source: ICIS news]
LONDON (ICIS)--The European toluene market remains subdued ahead of May, with April proving to be another quiet month outside of contractual business, sources said on Monday.
The lack of visibility is likely to keep May contract negotiations difficult, as players struggle to reach a consensus about where the European market should be valued.
“Demand is completely dead,” said one distributor, adding that it had not fielded any enquiries for toluene for almost two weeks now. This absence of activity was confirmed by numerous other buyers and traders.
Following the April contract settlements at $1,170-1,175/tonne (€901-905/tonne), the sharp drop in crude pricing brought European spot offers down as the month progressed.
Offers were seen as low as $1,150/tonne on a CIF (cost, insurance, freight) basis, and there was talk of deals done as low as $1,100/tonne and $1,125/tonne, but these were unconfirmed.
Spot offers edged back up to $1,170/tonne FOB (free on board) Rotterdam, but buyers remained much lower at $1,120/tonne.
While crude futures have started to recover ground lost earlier this month, and the US toluene market is also seeing prices edge back up towards the $4.00/gal level, the arbitrage window from Europe into the US remains closed, effectively keeping demand for spot parcels limited.
"Europe would have to be below $1,100/tonne for any arbitrage into the US to work," said one trader.
The Asian market was essentially flat or even softer than Europe amid slow demand from the gasoline blending and solvent sector. One trader said that this has seen material leave the region for the US, further limiting any export potential out of Europe.
An estimated 17,000 tonnes of toluene has left Asia bound for the US Gulf region in April – the bulk of which are volumes under contracts.
Looking ahead into May, the European market is expected to be well supplied, with two extraction units coming back on line.
A major consumer said that its toluene di-isocyanate (TDI) unit would also be back up and running, although it did not expect this to have much impact on the overall balance of the region.
There is expectation across the wider aromatics sector that demand will see an upturn in May, with key end-use markets such as construction and food packaging entering seasonally strong months.
Nevertheless, many players remain sceptical of historical trends, given the unpredictability of the markets and the wider global economy so far in 2013.
($1 = €0.77)
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