Europe toluene market sentiment bearish ahead of April talks

Truong Mellor

26-Mar-2014

Wall Street cuts chemicals forecastsLONDON (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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