Europe toluene spot hovers around the high $600s/tonne, demand to improve in 2018

08 December 2017 12:08 Source:ICIS News

LONDON (ICIS)--The continuation of high crude oil values and subsequent firm Eurobob gasoline levels has kept European spot toluene prices at the high $600s/tonne this week, although the market has slowed down ahead of the Christmas break, players said on Friday.

Eurobob was trading close or slightly below $600/tonne for most part of the week while toluene premiums over the Eurobob number stood at $60-80/tonne.

Domestic demand for most of the downstream outlets has remained on reasonable levels given seasonality and the slowdown of activity ahead of the Christmas holiday.

Some volumes have been exported to the US although this could not be confirmed widely in the market.

Probably some bigger parcels could not be placed in the European market and given that supply is long and players had to find a home for their material, the US market might have been a better alternative.

Still, any export to the US at this time of the year should be considered as purely opportunistic since the market there does not seem to be in real need of toluene volumes.

Recent interest from Asia for mixed aromatics and blending components looks to be slowly coming back as some players described a restart of the export flow.

The lingering discussion of a possible consumption tax on mixed aromatics imports into China has initially created uncertainty among market players but as the possibility of any decision remains vague, some of them decided to resume activity.

Moreover, when European players export material on a CFR (cost and freight) basis, it apparently means that they would not be the ones paying for any tax and this seems to make business decisions easier.

Still, the possibility of such a consumption tax, even if it has not materialised yet, it has definitely reduced the number of limited export cargoes heading to Asia.

Regarding the market’s outlook, players are confident that demand will be boosted in 2018 as soon as Germany’s BASF ramps up production at its 300,000 tonnes toluene di-isocyanate (TDI) plant in Ludwigshafen.

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

According to estimates, BASF’s TDI plant should become fully operational sometime in the second quarter of 2018 but, based according to some sources in the market, this could be happening during the first months of the year.

On the energy side, toluene players feel that the currently high crude oil levels are mostly driven by ongoing geopolitical tensions in the Middle East, Venezuela and also North Korea, but not by the supply/demand balance of the market.

Energy levels should not move higher than where they are now and a level of around $55/bbl next year would me much more justifiable and comfortable for business decisions, but any prediction would be quite unrealistic at this stage.

Meanwhile, in the distribution market, prices stood at €575/tonne FCA (free carrier) this week, mainly for contractual volumes, while producers were said to be asking higher values for spot business, but demand was limited.

Picture source: Imaginechina/REX/Shutterstock

By Vasiliki Parapouli