Europe toluene fundamentals slow, but firm crude keeps spot prices high

Source: ICIS News

2018/01/18

BASF TDI Ludwigshafen

LONDON (ICIS)--European toluene spot prices continue to hover around the high $600s/tonne and slightly above as the crude oil market shows consistent strength despite having undergone a correction through the sell-off of long positions, sources said on Thursday.

At the start of the week, Brent crude, the global benchmark, surpassed $70/bbl, the highest level since December 2014, and has remained above $69/bbl until Thursday early afternoon.

The upward push of the oil market is supported by the OPEC-led production cuts as well as fresh geopolitical concerns in Nigeria, where a local militant group has threatened to resume its attacks on domestic oil infrastructure and disrupt supply.

Moreover, latest data from the US’ American Petroleum Institute (API) on 17 January showed a significant draw of 5.121m barrels of crude oil inventories for the week ending 12 January, despite initial expectations of a 3.588m-barrels draw.

As a result, the status of the oil market has kept Eurobob gasoline values above $600/tonne for another week, with toluene premiums over the Eurobob number have been stable at $60-80/tonne.

Domestic toluene players stressed that the firm crude values remain the main driver of prices now as the rest of the market’s fundamentals continue to be slow.

Interest from the chemical side remained subdued, while most activities derived from the blending sector.

Players in distribution, however, said that stocks are not overflowing as their solvents business appears to be running well, while the month’s portfolio is well filled.

Still, compared to demand coming from the big markets such as toluene-di-isocyanate (TDI) or from the gasoline blending side, the current demand seen in distribution should be considered relatively small.

On the availability side, there is ample material on offer, while customers are covered with their contractual volumes and are not actively looking for any spot volumes.

Prices in the distribution market were still heard at €600-610/tonne on a free carrier (FCA) basis.

OUTLOOK
A big question mark that lies within the European toluene market is when Germany’s BASF will eventually ramp up production at its 300,000 tonne/year TDI plant in Ludwigshafen.

The market views on that are mixed.

Some of the downstream TDI players expect this to be happening as soon as February, although others doubt that it could be that soon, placing the start date later in the year.

Still, once this plant is fully operational there is expectation that toluene prices might increase and could probably stop tracking Eurobob gasoline values exclusively.

Pictured: BASF's TDI plant at Ludwigshafen, Germany
Source: BASF