The current upward trend in Asian toluene prices is undermining the arbitrage to the Middle East, and this could spark interest from Middle Eastern buyers in European molecules, sources said this week.
European toluene market is currently driven by strong demand from across the Atlantic, with product pricing at a netback. The spot price was last assessed at $667/mt FOB ARA Wednesday.
Asian pre-buying ahead of the Lunar New Year pushed prices to $720.50/mt FOB Korea Thursday, just a couple of dollars short of the highest level since July 2015.
Thus the Asian toluene is at a $53.50/mt premium over Europe.
Asian toluene has been consistently more expensive than European product since June last year. However the differential between the two marker prices in the past few weeks has been narrow enough to be offset by the difference in freight rates to the Middle East. This meant that Asian toluene was cheaper than European on a delivered to the Middle East basis.
Freight rates from Europe to the Middle East for a 5 kt parcel are now around $75/mt. From Asia to the Middle East it costs around $45/mt at the moment, according to shipping reports.
As such, European toluene in Middle East should now be around $20-$25/mt cheaper than toluene imported from South Korea.
