The Northwest European toluene and mixed xylenes market structures have shifted into a contango, driven by weak prompt demand.
But there was firm buy interest for May on both products in the Platts Market on Close windows Thursday.
The April CIF ARA prices of toluene and MX were assessed Thursday at $793/mt and $777.50/mt, while the corresponding May CIF ARA prices were $797/mt and $791/mt respectively.
This put the April-May contango Thursday at $4/mt for toluene and $13.50/mt for MX, changed from flat structures on both products a day earlier.
Demand for April toluene remains weak with an outage at a downstream TDI plant. Similarly, with a force majeure in place on BP's PTA plant in Geel, Belgium, spot demand for feedstock PX extraction from MX has remained subdued.
With the recent bullishness in the energy complex and slow demand from solvent users, there has been little appetite for spot procurement of toluene and MX from distributors.
Meanwhile, transatlantic arbitrage for both products remains closed or hard to work, keeping a lid on spot buying interest from traders.
The MX arbitrage was open on paper with the FOB USG May price last assessed Thursday at 284 cents/gal ($860.52/mt), which put the front-end European price at a wide discount of $83.02/mt.
But US demand for MX has so far been centered around April dates, which kept the appetite uncertain for May in the region.
This made the arbitrage difficult to work, even though the freight between the regions hovered at around $40/mt. Market participants also said earlier the specifications in the US are stringent for MX, which makes European material less suitable for buyers in that region.
For toluene, firm demand for May was seen in the US, although the arbitrage from Europe was closed.
With the FOB USG May price last assessed Thursday at 272 cents/gal ($826.88/mt), the front-end European price was at a discount of $33.88/mt, which was not enough to cover transatlantic freight.
Toluene to benzene HDA conversion margins have been unprofitable in recent weeks, keeping down demand for toluene from the segment.
The May benzene CIF ARA price was assessed Thursday at $875/mt, putting the April CIF ARA toluene price at a $82/mt discount -- less than half the $200/mt spread required for HDA conversion economics to break even.
Similarly, gasoline blending interest for the two aromatic products has not been supportive for fundamentals in recent months.
A bid from gasoline blenders for off-spec MX was heard Thursday at a $50/mt premium over Eurobob.
But gasoline blending values for toluene and MX have remained weak at around $40-$45/mt premiums in recent days, as upstream toluene-xylenes streams with similar octane levels were heard trading at around $20-25/mt premiums.
But with market participants anticipating downstream TDI and PTA plants restarting in Q2, demand fundamentals could strengthen for toluene and MX.
A trader said the upcoming driving season and the hurricane season could keep demand robust for blending components in the US. This in turn could raise the floor for toluene prices in Europe.
