Europe toluene weaker ahead of September contracts

27 August 2014 12:46 Source:ICIS News

LONDON (ICIS)--Ample domestic availability, weaker US pricing and softening benzene values are keeping downward pressure on the European toluene market ahead of September, sources said on Wednesday.

After European contracts for August were settled between a range of $1,138-1,140/tonne FOB NWE earlier this month, spot levels have gradually weakened in tandem with sluggish demand and limited export potential.

Some downward movement across the Atlantic over August pulled European prices down. With the US toluene market trading at $3.70/gal FOB, this meant that European numbers would have to be around the mid-$1,000s/tonne in order to make export business viable.

One major consumer confirmed that it had bought two TDI (toluene di-isocyanate) grade spot parcels at $1,075/tonne FOB last week for HDA (hydrodealkylation) production.

HDA production converts toluene to benzene, and with benzene spot prices hovering just below $1,400/tonne at the time, sources felt this would make toluene at $1,075/tonne economically viable.

Other European HDA producers were showing buying interest for toluene at $1,060/tonne. Players noted that Europe is currently being driven by HDA dynamics, which is the best indicator for pricing at the moment due to limited derivative demand and no real export business.

“The US is picking up slightly, but not quite enough to make these numbers workable for export out of Europe just yet,” one aromatics trader added.

US numbers were firmer this week, with bids gradually edging back up to $3.85/gal.

Downstream European TDI demand has been slow over August, and with the European toluene market increasingly export-driven, the lack of any arbitrage opportunities out of the region has helped build up supply levels ahead of September.

“We are starting to see more material being offered in the market now,” said one consumer. “Mostly this is due to limited export business.”

By Truong Mellor