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NWE benzene premium to toluene hits 21 month-high

The European spot price of benzene was assessed at a $272/mt premium to toluene this week, the widest spread since October 2014, S&P Global Platts data shows.

The European spot prices of benzene and toluene for 5-30 days forward loading were assessed at $760/mt CIF ARA and $488/mt FOB ARA on Tuesday, respectively.

This means that on-purpose toluene-to-benzene conversion is economical, for the first time since the fourth quarter of 2014. A $200/mt spread between the two products is normally needed for the conversion to break even.

The benzene spot market has been extremely tight for most of July. The return of three styrene monomer plants and two phenol plants from turnarounds in June, coupled with a tight Mediterranean market and a lack of imports into Europe for most of June, caused the spot market to tighten up around mid-July.

The current benzene spot price stands at a 17% premium to the July contract price of $649/mt CIF ARA, indicating that a higher contract price for August is on the cards.

A fundamentally bearish toluene market has also contributed to the widening discount to benzene. Plummeting gasoline-blending appetite in the second half of June and in July has caused toluene demand to sink. Chemical demand for most of 2016 has also been below expectations, sources have said.

The poor chemical demand for toluene is partly due to low demand from benzene converters, but also delays in TDI startups in Europe.

The July contract price of toluene settled at $560/mt FOB ARA, meaning that the current spot price is currently close to a 13% discount to the July contract price.

Time: 2016-7-29 Click: 5
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