Asia toluene flips to backwardation for prompt months

19 June 2014 11:25 Source:ICIS News

SINGAPORE (ICIS)--Asia spot toluene market has flipped into a backwardation market comparing July and August cargoes on the back of tight July supplies, market players said on Thursday.

July prices rose higher than August from 17 June, resulting in a backwardation value of around $3-4/tonne – the first time since February 2013, they said.

Spot July prices were assessed on 19 June’s close as $1,148-1,152/tonne FOB (free on board) and refreshed to a new 23-week high, while August was at $1,145-1,148/tonne FOB Korea, according to ICIS.

Short supplies in South Korea stemmed from reduced production ahead of new paraxylene (PX) unit start-up, on a shortage of feedstock pyrolysis gas (pygas), and amid persistent use of lighter feed – liquefied petroleum gas (LPG) – producers said.

Opportunistic demand surfaced from the US, given the reopening of the Asia-US arbitrage window, market players said.

“Now the spread between Asia prompt and US forward is at around $60/tonne, which is just sufficient to cover freight rates,” a South Korean producer said.

“I will like to ship, but [it] is impossible to find any July cargoes [in South Korea],” a second South Korean maker said.

By Sheau Ling Ong