Asian benzene's discount to toluene sank widened to a 2.5-year low Tuesday morning, with the spread pegged at minus $44/mt, $17/mt wider from the day before, Platts data showed. The last time the discount was this wide was March 25, 2009, when it was assessed at minus $62.50/mt.
As benzene needs to be at a premium of $100-120/mt to toluene for operators of toluene disproportionation and hydrodealkylation units to break even, the spread has to first invert and then rise considerably before TDP and HDA operators restart their units or increase operating rates. The last time the premium was above $100/mt was on June 10 2011, when it was $104/mt.
Market players attributed the widened discount between benzene and toluene to long benzene supply, which they said was due to widening naphtha-paraxylene margins.
PX and benzene are co-products, so PX producers seeking to maximize profit by increasing output will also produce more benzene in the process.
Tight PX supply has caused the spot price to skyrocket. The average PX spot price over September 1-19 was $1,714.65/mt CFR Taiwan/China, up $98.46/mt, or 6.09%, from August.
The naphtha-PX margin over the same period was $748.04/mt, up $78.15/mt, or 11.67%, from August. PX producers typically need a $230/mt margin against naphtha to break even.
Meanwhile, toluene prices have been supported by limited supplies due to turnarounds.
South Korea's Honam Petrochemical will shut its 120,000 mt/year Daesan toluene unit over October 10 to November 8 for a planned turnaround, a company source told Platts earlier.
And South Korean refiner GS Caltex has also shut its No. 1 reformer in Yeosu for a month-long annual turnaround, company sources said Monday.
Opinions were mixed on how long benzene's discount to toluene would last. "I think the overall global economy is too uncertain to be optimistic in this market," said a Singapore-based trader.
Another trader said: "In my opinion, the negative spread of $44/mt will be difficult to maintain."
TDP OPERATORS MAY NOT BE SUFFERING SO BADLY
Meanwhile, a trader noted that despite the widening negative discount of benzene to toluene, TDP unit operators might not be faring as badly as it appears with the total prices of isomer mixed xylenes and benzene still at a premium to toluene.
But "HDA [units are] all closed unless [they are open] for a specific reason," said a trader, implying that these units, which only produce benzene using toluene did not enjoy the same benefits of TDP units that also produce mixed xylenes.
On Tuesday morning, toluene prices sank on overnight crude and lower US and Europe prices, with the marker pegged at $1,101.50/mt, down $18/mt or 1.6% from Monday's assessment. The bears were out to play with the best bid for a November cargo early Tuesday heard at $1,093/mt, and the offer, at $1,098/mt.
The best December bid was seen at $1,070/mt, and the best offer, at $1,075/mt. A H2 October cargo was offered at $1,115/mt.
Overnight, FOB Rotterdam toluene was assessed at $1,060/mt, down $30/mt from Monday, as weak gasoline values pulled offers lower in a day of thin trade. US Gulf toluene however, fared relatively better to be assessed down just 1 cent/gallon to 357 cents/gal or $1,085.28/mt.
Asian benzene prices tumbled $35/mt, or 3.2%, early Tuesday, pegged at $1,057.50/mt FOB Korea, compared with Monday's assessment of $1,092.50/mt FOB Korea. Sources attributed the weaker Asian benzene market to the overnight declines in US and European markets, as well as weaker crude oil prices in early Asian trading.
