Asia toluene hits 20-wk high; may extend gains on tight supply

Focus story by Ong Sheau Ling

SINGAPORE (ICIS)–Spot toluene prices in Asia surged by more than $30/tonne this week to a 20-week high on Friday, fuelled by strong gains in the benzene and downstream paraxylene (PX) markets, traders said.

Market players expect toluene prices to stay firm in the near term, given low July availability and amid moderate demand from China’s gasoline blending sector. Expectations that inventories in the key China market will gradually decrease on lower June imports were also supporting the bullish sentiment, they said.

On Friday afternoon, second-half July toluene cargoes were traded at $1,117/tonne FOB (free on board) Korea, while an August deal was reported at $1,130/tonne FOB Korea, traders said.

“Prices just breach[ed] the $1,100/tonne [FOB Korea] market overnight,” a South Korean trader said.

“PX bull run supported sentiment,” a Chinese trader said.

PX prices hit a 15-week high at midday, tracking gains in the purified terephthalic acid (PTA) market.

A strong showing from the regional benzene market on Friday also provided a boost to toluene prices, market sources said.

Benzene prices hit a 17-week high in Asia, driven up by overnight spikes in crude futures prices, and in US benzene prices.

In the key China market, domestic prices of toluene also increased.

“PTA futures were up by more than 2% in just this morning session. That drove prices up prices [of toluene] too, along with energy gains,” a second Chinese trader said.

Deals were reported for prompt toluene lots at yuan (CNY) 8,100/tonne ex-tank on Friday morning, up by CNY25/tonne from the previous day.

Meanwhile, availability of spot cargoes from Japan and South Korea for July lifting was limited, industry sources said.

“Fundamentally, spot supply from South Korea is limited for July loading,” a South Korean producer said.

Most South Korean producers have sold out spot July-loading cargoes, with one left able to offer up to two cargoes. Others have reduced production because of shortage of feedstock pyrolysis gas (pygas), and amid persistent use of lighter feed – liquefied petroleum gas (LPG).

Spot cargoes from Japan are also scarce as a consequence of heavy turnaround schedule at the country’s aromatics units.

“Supply of July cargoes just turn tight this week, as many South Korean sellers managed to sell to China,” a second South Korean maker said.

“Although [downstream] gasoline blending is bad in South Korea and Japan, spot July toluene cargoes are tight in the market,” a third South Korean producer said.