There have been no trade flows of toluene from Europe to India in August as a result of logistical and operational difficulties, despite a wide open arbitrage on paper, market sources said this week.
Interest in moving product East was seen from early August amid a shuttered arbitrage to the US Gulf, with focus shifted to India although opportunities remained slim, market sources said.
CFR India toluene spot prices were assessed at $1,225/mt Friday -- a premium of $140/mt to the $1,085/mt FOB ARA toluene assessment on Thursday, according to Platts data.
Indian importers pegged buying interest this week at $1,210-1,215/mt CFR India (L/C 30 days), with most of their current demand satiated by product from Singapore or South Korea.
In considering shipping out to India, where toluene prices are currently the highest in the world, traders said a two- to three-week application process for the export license was fraught with risks and that there was no vessel space remaining in August for that route.
With restrictions and barriers to entry on export licenses, spot transactions and exports to India remain predominantly on a long-term contractual basis, other sources said. "Not many traders have the export license for India, so I don't expect a big impact on our market," a source said.
"[There are] two difficult issues with EU cargo, one is licence and [two is the] sailing period is 50 days," said an Indian distributor. "Size should be above 3,000-4,000 mt and freight is around $125/mt."
Freight costs vary between $80-125/mt, traders in Europe said, as the ARA-India route is not a frequently travelled one.
"You don't ship 5,000 mt lots to India -- it is a combination of a lot of small parcels," a trader said. "Therefore you have a limited number of ships every month."
Based on those indications, and freight costs of around $80-120/mt, the netback to Europe would land in a range of $1,085-1,135/mt FOB ARA.
On the other side of the fence, Indian buyers said local inventories had just been refilled and an extra 8,000-10,000 mt were expected to arrive by the end of August and first week of September, implying that appetites for more volumes ahead could ebb. Additionally, due to the ASEAN free trade agreement into India, European product would lose competitive advantage on import duties.
"People are looking for better netbacks, and looking at competing material from Taiwan and Korea into India," a trader said. "But how do you compete with freight out of Singapore at $30/mt and a 5% difference in duty."
