30 July 2013 11:32 [Source: ICIS news]
LONDON (ICIS)--Firmer US pricing has helped support spot numbers in the European toluene market ahead of August contract negotiations, sources said on Tuesday.
July saw some upward movement for domestic pricing on the back of rising gasoline values, which brought blenders into the European spot market. Offers for July material reached the $1,100/tonne (€825/tonne) mark before a spot deal was done at $1,097.50/tonne on an FOB (free on board) basis.
July contracts were agreed at $1,042.50-1,047.50/tonne FOB NWE (northwest Europe) earlier in the month, a reduction of $87.50-90/tonne from the previous month amid weak macroeconomic sentiment and lower Asian pricing.
The upward momentum in Europe this month has been at odds with derivative sentiment. Toluene di-isocyanate (TDI) demand in particular has been struggling with slow offtake and wider economic bearishness.
There is a sense among some players that the TDI market has begun to stabilise, and July offtake has shown signs of improvement on the previous month, but overall the picture remains weak.
As gasoline numbers fell back below $1,000/tonne FOB AR (Amsterdam-Rotterdam) towards the end of July, this saw interest in spot toluene from the blending sector pull back as the economics became unworkable.
Nevertheless, offers for spot toluene were maintained above $1,100/tonne as gains in the US market potentially opened the arbitrage window.
“The US is supporting the European market now,” explained one trader. “There is less blending, but with numbers there around $1,170/tonne and $55/tonne freight costs, sellers are happy to keep offers high or either export the material themselves.”
While demand for toluene in the US is below seasonal expectations overall, sources note that firm crude oil prices throughout July, as well as healthy polyurethanes (PU) demand, has helped keep prices firm ahead of August.
In Europe, the picture for demand in the upcoming months is unclear, although one supplier remains positive.
“We will see some crackers come down towards the end of August and into September,” the supplier said. “This could help support demand as players look to build inventory ahead of that.”
($1 = €0.75)
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