London — European mixed xylenes prices have been at a more than $100/mt discount to Asia and at least $35/mt below the US for at least two weeks, resulting in an open arbitrage window to both regions.
However, market sources in Europe say exports have yet to be attempted due to product specification differences, logistical hurdles, and uncertain forward price expectations.
The specification requirement in Asia is different to that in Europe, sources say, which has been an obstacle in cross-regional movement. A trader based in Europe said most European MX is used as a solvent grade and that a discount for European specifications may be negotiated.
"[The] big buyers will still buy regular EU spec with a discount of around $10/mt," a producer estimated.
Furthermore, sea voyage times could also add a layer of risk. A trader based in the US noted that he did not "see anyone trying that" because the Asian market is backwardated, making shipping volumes out of Europe potentially risky. Typically, a cargo could take six to eight weeks to travel between both regions.
"If you ship it over there and the music stops without a chair for you to sit on, not good," said another US-based source said of the Europe-Asia route.
The US trader said he had also offered European MX into the US but did not meet with any interest.
The spread between Europe and Asia first breached $100/mt territory on August 6, where it was $108/mt. Since then, it has fluctuated above that level, and peaked at $165.50/mt on Monday. The weekly Rotterdam to Far East Asia freight assessment for a 5,000 mt cargo was $87/mt last Friday, suggesting that at its peak, the margin between both regions was $78.50/mt.
On Tuesday, the FOB ARA mixed xylenes assessment was $794.50/mt, compared with the CFR Taiwan H1 and H2 October assessments at $958/mt.
The spread between Europe and the US is not as wide as that between Europe and Asia, though still above freight. The difference between both regions has been above freight since August 8, when it was $40.75/mt, with weekly freight for a 5,000-mt cargo from Rotterdam to the US Gulf at $35/mt.
On Tuesday, the September FOB US Gulf MX price was assessed at 277 cents/gal or $839.31/mt, placing the difference between both regions at $44.81/mt, above the assessed freight rate of $30.50/mt.
With the European market unaffected by global trade flows, a Europe-based source said the xylenes market in Europe was "dead" with the summer holiday lull and demand from India and Pakistan shifting away to Iran.
