Europe toluene unable to take advantage of US arbitrage opportunity

LONDON (ICIS)–Europe toluene has seen an opening of the arbitrage window to the US, but has so far been unable to take advantage, sources said on Friday.

Rising spot toluene prices in the US have opened the arbitrage window for exports from Europe. However, the opportunity has not yet led to substantial trade flow.

“The arbitrage to the US is open but nobody wants to play it,” said one buyer.

One of the reasons is the backwardation of the US market.

“It’s very notional, very dangerous – US high numbers for FOB [free on board] are for the front month. CFR [cost and freight] and for forward months is more risky,” said one trader. 

Another reason given is the limited availability of product and of transport vessels.

“If someone has a vessel and arbitrage cargo, they can even pay more [than quoted spot prices]. The availability is given but no-one is swimming in product,” said a second trader.