Toluene spot prices in Europe have dropped below the July contract price level, while also slipping to a discount versus mixed xylene prices.
Toluene spot prices were assessed at $593.50/mt FOB ARA Tuesday, down $8 on the day amid aggressive offering. The July European CP was settled at $600/mt at the end of last month -- down $37.50/mt from the June CP -- while the MX spot price stood at $595/mt CIF ARA Tuesday.
This put the toluene spot price at a $1.50/mt discount to MX, for the first time since March 29, when the discount stood at $2.50/mt. Toluene prices had consistently been at a premium over MX as fundamentals had remained strong.
However, sentiment had turned bearish on toluene as the demand front had become fragmented. Simultaneously, supplies had lengthened and triggered some aggressive sell interest during the previous trading sessions.
Toluene arbitrage opportunities out of Europe had remained shut, which had kept buy interest muted from traders. Demand from the downstream chemical distribution market also remained lackluster.
HDA conversion economics were negative throughout the past weeks, with the benzene to toluene premium standing at $165.50/mt Tuesday. HDA converters generally required a benzene premium of above $200/mt to break even.
Buy interest from gasoline blenders hovered at around $70/mt premiums over the July Eurobob gasoline swap, levels that failed to attract sell interest from producers. Producer sell ideas had mostly hovered above the $100/mt premiums mark. The toluene premium over July Ebob fell below the $100/mt mark Tuesday, down $8 at $97/mt.
The only demand support for toluene had come from downstream TDI producers, which had kept fundamentals supported throughout June and consequentially, the hopes of producers high.
However, most market participants were not convinced that TDI demand alone could sustain the strength in toluene fundamentals.
Meanwhile, MX fundamentals in Europe had found some support from export demand to India during the past weeks. Equally, while sentiment was not as bearish on MX, the demand front was muted on MX.
This kept some market participants sceptical whether MX fundamentals could hold their ground ahead. It also remained uncertain if MX prices could sustain a premium over toluene in the coming weeks.
