17 May 2013 06:05 [Source: ICIS news]
By Ong Sheau Ling
SINGAPORE (ICIS)--Asia will be exporting huge volumes of toluene to the US in May and June, easing the long supply in the region, which may curb the recent fall in prices, market sources said on Friday.
Arbitrage volumes estimated at around 30,000 tonnes will be exported from Asia, mainly from South Korea and Japan, for May loading to the US, while at least 24,000 tonnes will be exported in June, as the price gap between the two regions stayed widely opened, they said.
Spot toluene prices has been in the range of $1,130-1,145/tonne (€881-893/tonne) FOB (free on board) Korea since early April for cargoes from zero to six weeks forward loading, with prices inching towards the lower end over this week, weighed down by lower energy markets and softer discussion levels in the key China market, according to ICIS data.
In the US, spot toluene prices were inching up over the past four weeks from $3.84-4.11/gal FOB US Gulf for prompt barges, widening the price difference with Asia from $40/tonne to around $100/tonne, ICIS reported.
The downtrend in Asia began in early February from above $1,300/tonne FOB Korea falling to below $1,100/tonne FOB Korea in end March before recovering to early April levels of $1,140s/tonne FOB Korea, ICIS reported.
However, prices after holding for a while fell again this week to close to $1,130/tonne FOB Korea for June loading.
Prices in Asia have been undermined by the presence of long supply outstripping the weak demand post-Lunar New Year holidays in February.
Spot availability in Asia has been on the higher side, also because of unseen improving demand from the downstreams such as solvent and the gasoline blending sector in the region, producers and traders said.
A South Korean producer said it is exporting 6,000 tonnes of toluene for second-half May loading, while another South Korean maker will move a total of 10,000 tonnes for May lifting to the US.
Also, a northeast Asian trader is exporting 15,000 tonnes for May loading, comprising various Asian origins, traders said.
In June, a 12,000-tonne vessel was secured to move from South Korea to the US in first-half of the month, while the South Korean producer who exported 10,000 tonnes in May, said it is planning to move around 8,000 tonnes in June to the US.
“This is a good news to the market. At least, some cargoes are going out of Asia,” a Singapore-based trader said.
Besides northeast Asian parcels exiting the region to the US, the turnaround of SK Global Chemicals (SKGC)’s Ulsan-based reformer may help to reduce the long supply in northeast Asia.
Despite cargoes heading out of Asia, a couple of regional producers have extra spot availability in June.
For instance, CPC Corp has sold 12,000 tonnes of June cargoes on 16 May on FOB Kaoshiung basis, with destination of the parcels remained unclear.
“That’s a lot of material. And it seemed that given the distance advantage, the parcels should move to China,” a South Korean trader said.
China has returned to the import arena since the previous week, booking June and July shipments, in view of the possible return of the driving season as weather conditions improve in the northern part of the country, industry players said.
“It is hard to say for how long the arbitrage to the US [from Asia] will remain open, given the glimpse of improving import interest from China, and unclear gasoline blending in the US,” a South Korean maker said.
“We can safely say at least for now, there are some bullish factors to prevent further price downside [in Asia],” a southeast Asian producer said.
($1 = €0.78)
Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections
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