Singapore — The spread between benzene and its feedstock toluene narrowed to a 21-month low at $26.33/mt FOB Korea Monday amid weakening benzene prices and firming toluene, S&P Global Platts data showed.
The last time the spread was slimmer was November 1, 2016, at $19/mt.
Toluene was assessed at $818/mt FOB Korea Monday, almost stable from the start of the month, when it was assessed at $821/mt FOB Korea on September 3. Toluene prices have been supported recently by Chinese demand, trade sources said Tuesday.
Meanwhile, benzene prices have been on a downtrend since mid-August amid growing supply and lackluster demand. The FOB Korea benzene marker was assessed at $844.33/mt Monday, down $30.34/mt on the month, while CFR China benzene was assessed down $31/mt over the same period at $861/mt.
Supply in the region was expected to grow due to an increase in availability from Southeast Asia and India amid a closed spot arbitrage for those cargoes seeking demand outlets in the US or EU, market sources said.
Market sources had earlier anticipated a rise in demand from end-users in China for September and October delivery cargoes amid restocking activity prior to the week-long national holiday in China. However, a pick-up in demand has yet to be seen and inventory levels were heard higher on the week Monday.
East China stocks Monday stood at 167,000 mt, up 14,900 mt from the week before, market sources said.
Toluene is the feedstock to produce benzene and isomer-grade mixed xylene in toluene disproportionation units, and narrowing spreads reduce margins for TDP operators such as South Korea's GS Caltex and Japan's Showa Shell, as well as many other companies.
The spread between toluene and isomer-MX was assessed at $71/mt Monday, down from a multi-year high of $161/mt on August 23, meaning this spread has also recently been under pressure.
The narrowing product spreads were impacting all TDP producers in Asia, a TDP producer said Tuesday, but added it was not yet clear if operating rates would be reduced as producers might consider the slim spreads to be temporary.
