The premium of benzene to toluene hit a 19 week-low on Thursday, amid a strengthening prompt market for toluene parcels and a balanced to bearish outlook for European benzene. The spread between the two products was assessed at $55/mt, the lowest since June 23, S&P Global Platts data shows.
The European spot price of benzene rose $5/mt on Thursday and was assessed at $635/mt CIF ARA, while the European toluene spot price rose $25.50/mt to be assessed at $580/mt FOB ARA.
Spot benzene is currently trading at 3.64% discount to the November contract price of $659/mt, while the toluene spot price was assessed at a 2.65% premium to the November contract price of $565/mt FOB ARA.
As a result, benzene-to-toluene conversion units in Europe are currently cash-negative. As a rule of thumb, a spread of $150-$200/mt is needed between the two products for toluene-to-benzene conversion processes such as hydrodealkylation (HDA) to break even.
Most European HDA capacity is integrated and runs regardless of profitability.
The European benzene market has come under pressure since the settlement of the November contract price earlier this week, tracking prices in the US downwards, which in turn have tracked the crude oil complex downwards.
The benzene spot price was assessed at $636.87/mt FOB USG on Thursday. The January Brent ICE crude oil contract stood at $46.33/b at the 16:30 London Platts close on Thursday, down $3.90/b this week alone.
Toluene spot prices have moved in opposite direction this week, as prompt molecules have been reported to be far and few between in the Antwerp-Rotterdam-Amsterdam area.
On October 6, German chemicals producer Covestro declared a force majeure on toluene purchases at its TDI plant in Dormagen, Germany. As a result, toluene prices slumped in the first half of October, which in effect resulted in the arbitrage from Europe to the US and Asia opening wide.
Traders have said this week that most available molecules were exported in the second half of October to buyers in other regions, resulting in a tight spot market for toluene, especially for the first half of October.
Toluene prices have also been buoyed by a surging gasoline market in Northwest Europe, as the explosion on the Colonial pipeline -- which connects the oil-producing region in the US Gulf with New York harbor -- caused the gasoline arbitrage from Europe to the US Atlantic Coast to open.
The November Eurobob gasoline crack was assessed at $10.65/b on Thursday, up $0.95/b on the day and up $1.95/b this week.
