The toluene arbitrage from Northwest Europe to the US Gulf Coast area is currently open on paper, S&P Global Platts data shows. Due to volatility in downstream benzene, traders are however reluctant to book cargoes in Europe for discharge in the US, market sources said on Wednesday.
The European spot price of toluene was assessed at $620/mt FOB ARA on Tuesday, down $20/mt on the day and down $80/mt since four weeks ago when the spot price was at its highest in 18 months. In the US Gulf, April prices were last assessed at $699.20/mt FOB USG, putting the premium to European prices at $79.20/mt.
On European trader noted that the toluene arbitrage was indeed open to the US, but buying interest in the US was however hard to come by: "I've not heard of any toluene going to the US," the trader said on Wednesday.
A second trading source seconded that view, adding that no arbitrage cargoes were heard being attempted in Europe on Wednesday.
A third trader said that those who have toluene available in Europe were still focusing on finding local buyers: "One reason could be that the US is trading above gasoline blend value, so it could be hard to find actual buyers."
Global toluene demand has primarily being driven by benzene conversion for most of this year. As a rule of thumb, a $150-$200/mt benzene premium over toluene is needed for processes such as hydrodealkylation and toluene disproportionation to break even.
The European spot price of benzene was assessed at $819/mt CIF ARA on Tuesday, or $199/mt over toluene.
A March deal for benzene at $780/mt was however reported early Wednesday, indicating that benzene's steep price decline that started at the end of February has not come to an end.
"If benzene comes down further in the US we could see toluene also moving lower, since [benzene] conversion unit operators present the highest [bids in the market]. Maybe this uncertainty limits the interest in the arbitrage," the third source said.
