A lack of export opportunities coupled with rising inventories among chemical end-users is expected to pressure the European toluene spot market, at least in the short term, market sources said this week.
The European spot price of toluene was last assessed at $661/mt FOB ARA on Monday, unchanged from Friday. A trader source said that netbacks from export out of Europe were no longer the determining factor for the toluene spot market.
The trader noted that toluene-to-benzene conversion economics were favorable at the moment, and hence European producers with the means to convert toluene to benzene were currently running their plants hard.
A benzene premium of $150-$200/mt over toluene is needed for conversion processes such as hydrodealkylation to break even. The European spot price of benzene was last assessed at $979/mt CIF ARA on Monday, putting toluene's discount to benzene at $318/mt.
A second market source said that toluene inventories were high at the moment, adding that toluene-to-benzene converters were not buying in the spot market for the time being. The same source added that HDA converters were likely to be willing buyers around $630/mt.
"Gasoline blend value is already below $600/mt. Before the market falls so low, exports should work again," the second source said, adding that gasoline blenders in the US Gulf Coast were currently showing buying interest around $670/mt FOB USG.
Following a decline in Korean prices, the arbitrage from Europe to buyers in India and Pakistan has shut, a third source said. "You need European prices in the $620-$630/mt range for the exports from Europe to those places to work," according to the third source.
