European reformate prices sag after arbitrage to China shuts
London (Platts)--21Nov2012/656 am EST/1156 GMT
European reformate prices have dropped sharply as the Europe-China
reformate arbitrage route has closed following a drop in domestic gasoline
prices in China, sources said this week.
Last week, the Chinese government decreased domestic gasoline prices by
Yuan 310/mt, a Chinese trader said, leading to the closure of the
Europe-China arbitrage route for blend components such as reformate.
Since mid-October, China had been pulling high volumes of reformate from
Europe, up to 100,000 mt/month, a Europe-based gasoline trader said this
"It's a flow that happens or doesn't happen. It's not a constant flow of
demand," he said.
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Reformates are aromatic components of high-octane gasoline produced from
low-octane naphtha processed in a catalytic reformer.
Reformate is currently pricing at a $50/mt premium versus FOB Rotterdam
Eurobob barges, the trader said, down from levels heard early last week of
Eurobob was last assessed at Tuesday's European close at $961/mt, Platts
The surge in Chinese demand from mid-October helped push the reformate
price to levels between $65-90/mt versus Eurobob barges, traders said.
"30,000 mt reformate was shown last week [in the
Amsterdam-Rotterdam-Antwerp trading hub] and that is the most for a long
time," he said. "I think 70,000 mt is also shown from the Baltics on a
typical month, plus smaller lots in ARA by barge," a second Europe-based
trader said this week.
However, there are now increasing homes for reformate in Europe as its
premium versus EBOB falls, the first Europe based trader said.
"Chinese demand for reformate has dried up; there's more finding homes
in Europe," the first Europe-based gasoline trader said. "A couple of 10,000
mt reformate parcels traded [in Europe] at $50/mt late last week."
Moreover, the Europe-China arbitrage route for reformate is unlikely to
reopen as the Chinese government plans to impose a consumption tax of Yuan
1.0/liter ($216.91/mt) for MTBE and other blend components from January 1,
Traders said the newly imposed taxes would certainly have a detrimental
effect on blend component imports into China in 2013.
"For mix aromatics the imported volume is 2.3 million mt annually, the
new tax will cut this volume by half. Where will the 1.15 million mt go? To
the Southeast Asian market," a Chinese trader said Wednesday.
--Anna Ward, email@example.com
--Edited by Alisdair Bowles, firstname.lastname@example.org