Benzene's premium to toluene in the European market so far this year has averaged its highest since 2014, providing European benzene-to-toluene conversion operators with positive hydrodealkylation (HDA) margins for the first time since the crude oil price crash of 2014.
Benzene's average premium to toluene so far this year has averaged $199.56/mt, S&P Global Platts data shows. The premium averaged $106.26/mt in 2016 and a meager $43.05/mt in 2015.
Toluene-to-benzene conversion processes normally require a $150-$200/mt benzene premium over toluene to break even, with Mobil Select toluene disproportionation (MSTDP) units closer to $150/mt; toluene hydrodealkylation (HDA) is a more expensive process requiring close to $200/mt.
The benzene market has been strong globally for most of 2017, largely due to fewer exports from Asia to the US. A plethora of new benzene capacities and units downstream of benzene had been earmarked for startup in 2017 in Asia.
The downstream units in Asia have been more timely in their scheduled startups compared the benzene production units, resulting in fewer benzene exports from Asia, in particular from Korea to the US.
Furthermore, the global toluene market has come under pressure from easing global demand for gasoline blending.
Following the oil price decline in 2014, gasoline demand jumped globally, particularly in the US. As a result, gasoline blending margins and gasoline cracks soared in 2015, and toluene's incremental demand moved over to the gasoline pool, due to toluene's relatively high octane rating and overall strong gasoline blending properties.
