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Global Aromatics Pricing Analysis



Toluene: Aromatics demand improving in Brazil, disproportionation margins narrow in US

Staff Reports



Toluene: US blend values remain higher than spot pricing; European buyers, sellers sidelined



ASIA

Prices were lower Friday versus Thursday on thin demand in China and oversupply concerns, amid a weaker energy complex.


In East China, domestic prices were lower at Yuan 5,335/mt, or about $634/mt on an import parity basis, down Yuan 35/mt. In the late evening, Yuan 5,300/mt was heard traded, a Chinese trader said.


Toluene inventories in East China stood at about 40,000 mt, unchanged week on week.


In Asia, January ICE Brent futures stood at $48.63/b at 0830 GMT Friday, down from $48.81/b on Thursday.


Nevertheless, in spite of the day-on-day fall, prices were higher week on week as the FOB Korea marker stood at $631.50/mt FOB Korea on Friday versus $622.50/mt a week ago.


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Paraxylene and benzene producers are bullish about the outlook for their products in 2017 and so are keen to secure toluene feedstock. Also, buying is expected to emerge from India. There is a lower inventory situation as a result of demonetization.


On November 8, Prime Minister Narendra Modi said 500 and 1,000 rupee notes would no longer be recognized legally as currency. As such, most market participants in India are avoiding the purchase of imported petrochemicals which include toluene, a local trader said. Negotiations for 2017 term contracts are ongoing.


On Tuesday, South Korea’s Lotte Chemical issued a 2017 sell tender for toluene.


In other news, Hengyi Industries, a Brunei-based subsidiary of Chinese polyester manufacturer Zhejiang Hengyi Group, is aiming to commission its planned $4 billion refinery and aromatics plant in Brunei by the second quarter of 2019, the company said in a statement to S&P Global Platts Thursday.


The company expects to produce about 1.5 million mt/year of PX and 500,000 mt/year of benzene.



EUROPE

The European spot price of toluene shed $14/mt on Friday to be assessed at $583.50/mt FOB ARA but was still up $30.50/mt on the week.


Toluene’s premium to Eurobob gasoline swaps was assessed at $125/mt on Friday, well above its gasoline blend value, underlining toluene’s disconnect from the gasoline pool for the time being.


During the Platts MOC window, Total Petrochemicals bid for 1,000 mt of toluene for loading any December at a $124/mt premium to Eurobob gasoline.


Several offers around the continent were heard on Friday, with sellers offering large slugs of 3,000 mt at premiums around $110-$120/mt above Eurobob gasoline on a CIF basis.


In news, German chemicals producer BASF could not say how long its TDI plant a Ludwigshafen in Germany will be in shutdown.


“For the time being the restart is not scheduled,” a BASF spokesman said, adding that no force majeure had been declared on toluene purchases. The spokesman said that the shutdown was due to a “technical defect,” without specifying further the nature of the problem.



LATIN AMERICA

Latin American toluene pricing rose $39/mt since Nov. 18 to a Wednesday assessment of $559-$561/mt FOB Brazil.


The marker closed Wednesday at its highest point in 23-plus weeks since being assessed at $562-$564/mt FOB Brazil on June 10, 2016, according to S&P Global Platts data.


Latin mixed xylene rose $30/mt since Nov. 18, assessed Wednesday at $569-$571/mt FOB Brazil. Both markers were assessed Wednesday as the Americas markets were not assessed Friday in observance of the Thanksgiving holiday in the US.


Brazilian demand for both toluene and MX has been increasing throughout November, a regional source said, adding that many in the market wonder how long it will last.


The source added that improved consumer confidence in Brazil is contributing to an uptick in demand, and that anticipation of seasonal industry shutdowns in mid-December is prompting an increase in purchases.


Both Latin toluene and MX markers tracked higher pricing in the US, where the respective levels rode a stronger energy complex despite thin liquidity, sources said.


Sources said the toluene market could see more activity in the first quarter of 2017, pointing to a potential increase in demand tied to new regulations taking effect in the US.


“The change in the amount of sulfur that will be allowed in gasoline will result in more toluene into gasoline,” a source said. The Environmental Protection Agency’s Tier 3 regulations require that sulfur content in gasoline be reduced from 30 ppm to 10 ppm effective January 1, 2017.


There will be an octane shortage as a result and more toluene will be absorbed into gasoline, sources said.


In energy, the NYMEX December RBOB futures contract settled 8.26 cents higher at 142.17 cents/gal, putting the toluene-RBOB spread at 61.83 cents/gal and the MX-RBOB spread at 65.83 cents/gal.


In Latin American production news, a planned turnaround at Braskem’s Camacari complex -- Brazil’s biggest petrochemical plant -- in Bahia is still underway.


Market sources previously said the TA would last 45 days and affect all derivatives. The TA is not expected to affect Braskem’s ability to supply customers in South America, regional sources have said, adding that a potential decrease in aromatics exports could come into play.


The plant has an annual capacity of 50,000 mt/year of MX, 42,000 mt/year for toluene and 203,000 mt/year of paraxylene.



UNITED STATES

US spot toluene for November rose 13 cents from Friday, assessed Wednesday at 204 cents/gal FOB USG. December was assessed at the same level.


S&P Global Platts did not assess markets Thursday and Friday in observance of the Thanksgiving holiday.


Spot pricing saw gains last week because of a stronger energy complex, sources said.


In energy, the front-month NYMEX RBOB futures contract settled 8.26 cents/gal higher this week at 142.17 cents/gal Wednesday, putting the toluene-to-RBOB spread at 61.83 cents/gal.


Blend values were cheaper than spot pricing, last estimated by S&P Global Platts data at 195.22 cents/gal Wednesday.


Disproportionation economics narrowed, but continued to see positive territory as the price spread between toluene against benzene and mixed xylene remained wide enough.


In production, derivative economics via Mobil selective toluene disproportionation and toluene disproportionation margins were positive, but hydrodealkylation margins were negative Wednesday.


MSTDP economics were estimated around $61.63/mt and TDP economics were estimated at $66.80/mt, according to S&P Global Platts data, not including unit operating costs.


Meanwhile, HDA margins were estimated around minus $24.75/mt, based on Platts data, not including unit operating costs. Commercial-grade toluene was assessed at 194 cents/gal FOB USG, maintaining a 10 cents/gal discount to nitration-grade toluene this week in thin activity.


Xylenes commentary: US production economics show improvement, European „Dec PET prices to follow PX higher







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