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Toluene-fed chemical production margins soften on weaker benzene, xylenes

Houston (Platts)--19 Apr 2017 634 pm EDT/2234 GMT


Falling benzene prices and continued softness in xylenes have significantly dented toluene-fed chemical production margins in the US and pushed prices to levels not seen since late fourth-quarter 2016.

Hydrodealkylation (HDA) margins fell to minus $35.87/mt Tuesday while toluene disproportionation (TDP) and Mobil selective toluene disproportionation (MSTDP) margins were at minus $6.69/mt and $44.43/mt, respectively, according to S&P Global Platts data.

Margins have fallen dramatically since the beginning of the month with HDA margins hit hardest, falling $79.71/mt and deep into negative territory since April 3. TDP and MSTDP margins have seen similar declines during the same period.

One of the primary drivers behind the weaker margins is falling benzene prices. Spot benzene values on a DDP USG basis have fallen roughly 6% thus far in April and closed Tuesday at 264 cents/gal.

Further, toluene prices have been stable in a stagnant market and were assessed Tuesday at 230 cents/gal FOB USG, 8 cents higher than at the beginning of the month.

Lower margins are likely to translate into reduced operating rates and subsequently curbed supply, particularly on products such as benzene, sources said.

This reduced supply, coupled with fewer imports from South Korea and increased demand from downstream styrene units, could lend support to benzene prices and help boost toluene-fed chemical production margins, sources said.

Spot benzene prices on a DDP basis have bounced back from the 262 cents/gal assessment on Monday and ranges for April barrels were seen at 266-275 cents/gal DDP USG Wednesday morning.

--Kevin Allen, kevin.allen@spglobal.com
--Edited by Jason Lindquist, jason.lindquist@spglobal.com

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