Korean petrochemicals heavyweight SK Energy, the biggest producer of toluene in Asia, is planning to ship a mammoth load of benzene and toluene to the US Gulf, traders in Asia said Monday.
SK Energy was heard planning to load a 21,000 mt benzene/toluene shipment in second-half November aboard the chemical tanker Maritime Tuntinga.
Aromatics traders in Asia believe that the Korean producer is shipping its cargo to the port of Kalama, Washington, where it has a term contract with specialty chemical company Lubrizol Advanced Materials, formerly known as Noveon.
"They haven't decided whether to load benzene or toluene at this point...The word in the market is that it could be either," one trader said.
Most traders believe that SK Energy is attempting to dispose of length from the Asian toluene market, which is inundated with around 80,000 mt of excess material in the key China market alone.
"What other choice does SK Energy have? Drink toluene?" a trader quipped. Most traders polled deemed this spot shipment as a massive money-losing venture, since the Korea/US arbitrage was far from open.
On Friday, Platts assessed US Gulf nitration grade toluene at 302 cents/gal FOB USG for November loading material, equating to around $917/mt. December prices were assessed in a 1 ct/gal, or $3/mt backwardation.
In Asia, however, prices were drastically higher. SK Energy was voracious in its hunt for spot toluene last week, devouring five cargoes during the Platts Market on Close Assessment window. This spurred the FOB Korea market to jump $55/mt over the week, closing at $990/mt Friday.
Based on FOB Korea to FOB USG spreads alone, SK could incur a loss of around $75 for every tonne shipped. Korea to US Gulf freight rates were further estimated to cost between $65-95/mt, yielding theoretical losses of around $150/mt.
"Do the math and you'll see that the arbitrage numbers don't stack up for toluene. Even if SK Energy has contracted vessels and hence good rates, there will be a limit on the volume that they can ship," one trader said.
SK Energy was heard planning to load a 21,000 mt benzene/toluene shipment in second-half November aboard the chemical tanker Maritime Tuntinga.
Aromatics traders in Asia believe that the Korean producer is shipping its cargo to the port of Kalama, Washington, where it has a term contract with specialty chemical company Lubrizol Advanced Materials, formerly known as Noveon.
"They haven't decided whether to load benzene or toluene at this point...The word in the market is that it could be either," one trader said.
Most traders believe that SK Energy is attempting to dispose of length from the Asian toluene market, which is inundated with around 80,000 mt of excess material in the key China market alone.
"What other choice does SK Energy have? Drink toluene?" a trader quipped. Most traders polled deemed this spot shipment as a massive money-losing venture, since the Korea/US arbitrage was far from open.
On Friday, Platts assessed US Gulf nitration grade toluene at 302 cents/gal FOB USG for November loading material, equating to around $917/mt. December prices were assessed in a 1 ct/gal, or $3/mt backwardation.
In Asia, however, prices were drastically higher. SK Energy was voracious in its hunt for spot toluene last week, devouring five cargoes during the Platts Market on Close Assessment window. This spurred the FOB Korea market to jump $55/mt over the week, closing at $990/mt Friday.
Based on FOB Korea to FOB USG spreads alone, SK could incur a loss of around $75 for every tonne shipped. Korea to US Gulf freight rates were further estimated to cost between $65-95/mt, yielding theoretical losses of around $150/mt.
"Do the math and you'll see that the arbitrage numbers don't stack up for toluene. Even if SK Energy has contracted vessels and hence good rates, there will be a limit on the volume that they can ship," one trader said.
