Price and market trends: Europe toluene sentiment bearish

28 June 2013 09:57  [Source: ICB]

Slow derivative offtake and a weak US market is keeping European toluene sentiment bearish, sources said on 17 June.

Downstream European toluene di-isocyanate (TDI) contract prices have seen sizeable drops in June, driven by weak market conditions in the foam and bedding sectors.


 TDI prices are down on weak foam and bedding markets

Copyright: Rex Features

The decreases have been larger than first thought because of strong competition amid reduced domestic and export demand, as well as lengthy supply.

Additionally, with spot prices for toluene in the US hovering around the $3.80/gal mark, any export business from Europe into the region would only be workable with domestic numbers comfortably below $1,100/tonne.

Combined with a growing sense of weakness in Asia, where spot prices have seen a steady decline so far in June amid high inventory levels, the near term global outlook for toluene is bearish.

Despite this, offers for European spot parcels were initially still at June contract levels earlier in the month, in some cases even higher at $1,150/tonne, with sellers keen to keep prices up amid balanced domestic availability.

European June contracts were settled at $1,130.00-1,137.50/tonne, down $22.50-25.00/tonne from the previous month.

One trader felt that with no demand outside of contract to be enticed by lower numbers, there was no real incentive for sellers to drop spot offers.

"Prices are tough to gauge - the flakiness of the market means you would have to pay CP [contract price levels] if you wanted material," reasoned one producer.

Other sources largely agreed that prices around $1,100/tonne FOB (free on board) were more realistic. There was talk of a spot deal done at $1,110/tonne on a CFR (cost and freight) basis, but several players pointed out that even this would still be too high for export purposes.

With gasoline prices still comfortably below the $1,000/tonne FOB AR (Amsterdam-Rotterdam) level, there is no demand for toluene coming from the blending sector either.

By: Truong Mellor
+44 208 652 3214

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