Toluene demand for benzene conversion purposes is expected to be subdued in June despite a healthy benzene premium over toluene in the contractual market in June, sources said.
The European contract price of benzene in June settled at $824/mt, up $4/mt from May.
The European contract price of toluene settled $10/mt higher from May at $637.50/mt, putting benzene's premium to toluene at $186.50/mt.
Toluene to benzene conversion processes, such as hydrodealkylation (HDA) and toluene disproportionation (TDP), normally need a $150-200/mt benzene premium to toluene to break even.
HDA breakeven-levels are towards the higher end of that spectrum.
"At the moment, I think toluene will be sold into the spot market [rather than be converted to benzene]...unless spot benzene rallies, but that doesn't seem likely at the moment," said one trader source.
A second trader echoed the same sentiment: "I don't think HDA will be a factor in June."
The European spot price of benzene was last assessed at $796/mt CIF ARA on Thursday, up $2/mt on the day.
On Friday afternoon, a benzene deal for June delivery was reported at $760/mt CIF ARA, at a 7.7% discount to the June contract price.
Meanwhile in the toluene market, the European spot price rose $15/mt on Thursday to be assessed at $655/mt FOB ARA, on the back of buying interest for loading in the first half of June.
Sources said, that towards the second half of June, toluene is expected to lengthen in Europe, amid lower benzene conversion demand and imported cargoes from Portugal and Russia offered into the ARA region.
