Benzene discount to toluene in Asia widens to 30 month low

21-Sep-11
Asian benzene's discount to toluene sank widened to a 30 month low on Tuesday morning, with the spread pegged at -US$44/mt, lower than on the previous day by US$17/mt, as per Platts. On March 25, 2009, the discount was assessed at -$62.50/mt. The discounts are being attributed to long benzene supply, which they said was due to widening naphtha-paraxylene margins. As benzene needs to be at a premium of US$100-120/mt to toluene for operators of toluene disproportionation and hydrodealkylation units to break even, the spread has to first invert and then rise considerably before TDP and HDA operators restart their units or increase operating rates. The last time the premium crossed the hundred dollar threshold was on June 10 2011, when it was US$104/mt. PX and benzene are co-products, so PX producers seeking to maximize profit by increasing output will also produce more benzene in the process. Tight PX supply has caused the spot price to skyrocket. The average PX spot price over September 1-19 was US$1714.65/mt CFR Taiwan/China, up by US$98.46/mt from August. The naphtha-PX margin over the same period was US$748.04/mt. PX producers typically need a US$230/mt margin against naphtha to break even. Meanwhile, toluene prices have been supported by limited supplies due to turnarounds. Asian benzene prices tumbled by US$35/mt early Tuesday, to US$1057.50/mt FOB Korea. The weaker Asian benzene market has been attributed to the overnight declines in US and European markets, as well as weaker crude oil prices in early Asian trading.
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