The spread between benzene and toluene hit a two-month high of $136.50/mt on Tuesday, with benzene prices buoyed by rising prices globally this month while toluene prices have remained rangebound around netback prices for exports to Asia.
As a result, benzene-to-toluene conversion units in Europe are currently approaching cash-positive territory. 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 spot price of benzene surged $30/mt on Tuesday and was assessed at $706.50/mt CIF ARA, its highest since August 23 and at a 7.2% premium to the European November contract price of $659/mt.
The benzene contract price in Europe looks set to rise in December, but the last reported trade for December was heard done at $710/mt. Benzene prices have been rising due to an open arbitrage to the US from Europe.
As a result of a somewhat unexpected, tight benzene market in Asia, and the structural need for benzene imports to the US, traders expect Europe to fill shorts in the US as the arbitrage from Asia to the US is slammed shut.
The benzene spot price in the US Gulf was assessed at 239 cents/gal on Tuesday, or $714.61/mt DDP USG. The FOB Korea benzene marker was assessed at $722/mt Wednesday.
The European toluene spot price was assessed at $570/mt FOB ARA on Tuesday. The European toluene market has been supported by export demand to Asian countries such as India since October, but low chemical demand due to TDI outages prompted traders to move material out of Europe in the fourth quarter.
