Rising reformate dents aromatics extraction economics
Recent gains in US reformate prices have crimped extraction economics for US aromatics premiums for products like toluene and mixed xylenes, S&P Global Platts data showed Nov. 20.
Reformate barge pricing on a DAP basis has risen over 20% since the beginning of November, closing Nov. 20 at 151.85 cents/gal. During the same period, unleaded 87 prices have gained just under 11.75%, closing at 114.53 cents/gal. Regrade, the spread between regular and premium gasolines, remained soft at just 4.75 cents/gal.
Sources in the gasoline markets said demand was for 100+ octanes with a trade for 105 octane reformate was heard done Nov. 19 at NYMEX December RBOB plus 40 cents/gal and 100 octane 1 psi were heard bid Nov. 20 at NYMEX December RBOB plus 39 cents/gal.
"105 octane doesn't sound like reformate," a broker said. "It sounds like mixed xylenes or some high aromatic barrel whose primary use is in petrochemicals."
The gains in reformate, driven by stronger, have narrowed the spread between aromatics and has pushed the prompt spot mixed xylene-reformate spread into unfavorable territory at just over 6 cents/gal, S&P Global Platts data showed. Generally aromatics producers consider a spread of 15-20 cents an attractive level to extract.
Economics may not see much near term improvement amid expectations that the US mixed xylene market will lengthen following the restart of Citgo's production at Lake Charles, Louisisana. The company shut production at the site following the landfall of Hurricane Laura in late August. Its restart is expected to add length to the market, mostly during the latter half of November and early December, with sources noting that the company will attend to contractual obligations before delving into the spot market. Citgo has the capacity to push as much as 40,000 mt per month into the US market. That added supply, coupled with pressure from weak demand from the downstream paraxylene market, was expected to push prices lower, participants said.
Similar dynamics could be seen in the US toluene market where premiums to reformate shrank to just over 12 cents on Nov. 20. Aromatics blend values remained soft this week with both toluene and MX's blend value last estimated at near 138 cents/gal, S&P Global Platts data showed. Toluene demand from the chemical segment was tenuous with STDP margins slipping on the week amid slight declines in benzene and steady paraxylene.
Sources noted that if economics remain poor for US aromatics makers for an extended period of time, producers may opt to forego extraction and the aromatics markets could tighten and prices could move higher as a result. This would bode poorly for aromatics as stronger toluene pricing would dent chemical demand and crimp margins for toluene conversion unit while stronger MX pricing would further stifle margins for paraxylene producers.
