Europe toluene market sentiment bearish ahead of April talks
Truong Mellor
26-Mar-2014
LONDON
(ICIS)–Bearish global pricing and limited demand from
gasoline blenders is weighing on European toluene sentiment
ahead of April contract talks, sources said on
Wednesday.
While spot pricing in Asia has shown signs of a slight
recovery after dropping to a 20-month low earlier in
March, numbers are still around $1,050-1,060/tonne FOB (free
on board) Korea, keeping any arbitrage opportunities from
Europe to the region unworkable.
Similarly, weak demand in the US has kept a lid on pricing
across the Atlantic. A single deal was done at $3.62/gal FOB,
meaning European numbers would have to move to the low
$1,000s/tonne in order to open the arbitrage window into the
US.
“With the arbitrage window closed, there is interest in
material from traders,” one European consumer said. “We don’t
really see any domestic demand for spot right now.”
Offers for spot toluene were last heard at $1,130/tonne FOB,
with sellers unwilling to drop numbers significantly due to
balanced regional availability, but there were no
corresponding bids seen.
“There is still maybe limited availability out of the
Rhineland,” said one source. “But nobody is really looking
for material.”
With gasoline still trading below $1,000/tonne FOB, this
meant that there was so far no real interest in toluene from
the blending sector. Sources said that blenders were also
less likely to pay winter premiums of around $80/tonne as the
summer period approaches.
Toluene can be used as a high octane booster in
gasoline fuels.
While there had been talk that the
toluene/benzene spread would support HDA
(hydrodealkylation) production in Europe, where toluene is
converted into benzene, sources were now arguing that this was unlikely going into
April.
Several players felt that while prompt benzene
numbers were bullish amid a squeeze on short-term
availability, the global market was due for some downward
correction following soaring costs so far in 2014.
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