The spread between toluene prices in Europe and South Korea surged to within reach of an all-time high Thursday, due to a supply crunch in Europe.
Platts assessed toluene at $1,394.50/mt FOB ARA and $1,193.50/mt FOB Korea Thursday, putting the spread at $201/mt. The spread was up a steep $68/mt, or 51%, from Wednesday's close and is the highest it has been since finishing at an all-time high of $219/mt on June 5, according to Platts data.
Freight to move a 5,000-10,000 mt cargo from South Korea to Europe is currently around $80-120/mt, shipbrokers told Platts Friday, which means the arbitrage from Europe to Asia is wide open.
However, trading sources told Platts Friday that no fixtures have been seen yet.
One toluene trader based in Singapore pointed out that it was the prompt laycan in Europe that had rallied in particular, adding that the further forward months were not as well-supported. It takes about 40-50 days to ship product from South Korea to Rotterdam.
"October, if there is a bid, [it should be at] $1,310/mt. I feel no one will ship [from South Korea to Europe]," he said.
Platts assessed September toluene at $1,420/mt FOB ARA and October toluene at $1,330/mt FOB ARA on Thursday. This put the September/October backwardation at $90/mt on Thursday, compared with just $10/mt on Wednesday.
The FOB Korea toluene price has been rising in the past week, driven by increased Chinese demand and falling stocks in East China. China is Asia's largest buyer of toluene. In addition, cargo arrivals so far in September have been lower-than-expected due to delays caused by Typhoon Bolaven which hit Northeast Asia late August.
But gains in the FOB ARA market have sharply outpaced the rise in Asia due to turnarounds and production issues in Europe, market sources have told Platts. This has resulted in the FOB ARA price jumping $71/mt or 5.4% from last Friday to this Thursday. In comparison, the FOB Korea toluene marker rose $31/mt or 2.7% over the same period.