Europe toluene spot up on higher energy, firmer premiums and ongoing China interest

LONDON (ICIS)–Ongoing interest for blending components and mixed aromatics from China as well as increased energy values have firmed European spot toluene prices further this week pushing premiums over the Eurobob gasoline number slightly higher, sources said on Thursday.

The increased activity from China, which was first noticed nearly a month ago, is currently looking robust and consistent but it is difficult to read how long it could last.

According to estimates, this will depend on the freight but also on the ongoing discussion about a new consumption tax the Chinese government was initially expected to implement in May.

However, so far the timeframe for this remains unclear.

Other sources said the demand coming out of China was part of the permanent flow to Asia, and nothing more than that.

On the energy side, Eurobob values have been trading slightly higher so far this week hovering around $553-557/tonne by Wednesday afternoon.

Toluene premiums over the Eurobob number stood at $95-110/tonne this week.

In the crude oil markets, tensions between central government forces and Kurdish regional authorities in north Iraq continued to support crude benchmarks mid-week.

Estimates from the US industry organisation American Petroleum Institute (API), meanwhile, showed that a large draw in US crude stocks also contributed to the uptick.

Data showing a larger-than-expected draw in US crude stocks pushed Brent to a three-week high.

Data from the Energy Information Administration (EIA) showed that US crude stocks had fallen by 5.73m barrels in the week to 13 October, higher than analysts’ expectations for a 4.2m barrel decrease.

News of an outage cutting production in Iraqi Kurdistan kept prices back into positive territory.

Back to toluene, domestic demand appeared to be covered by contractual business, while volumes in distribution were stable and as expected for October but not overwhelming.

Other sources in distribution noticed that activity was somewhat softer and quoted prices around €550-570/tonne on a free carrier (FCA) basis this week.

Meanwhile, economics for hydrodealkylation (HDA) production remained on negative territory as the spread between toluene and benzene prices seemed low.

HDA is the process whereby benzene is produced via toluene, but the process is only viable when there is a healthy spread of benzene over toluene.

The industry consensus is that toluene x1.25 should come in below the benzene price to make HDA production economics workable.