Americas: US toluene, MX spread narrows from 20 cents to 12 cents

p>The spread between US toluene and mixed xylenes narrowed to roughly 12 cents/gal ($4/mt) on Thursday morning. For more than a week from September 27 to October 6, mixed xylenes averaged a roughly 20-cent premium to toluene. Mixed xylenes were supported by a nearly open arbitrage opportunity to the Far East as well as strong derivative paraxylene demand. Even in late Wednesday trades, MX maintained its premium. Late yesterday MX was heard done at 295 cents/gal FOB Corpus Christi for a 5 kt parcel. Toluene saw heavy trading, with about 60,000 barrels of volume transacting.

Nitration-grade was done early in the day at 270 cents/gal DDP USG for October and subsequently offered at 275 cents/gal for H2 October. After close of the Platts Market on Close assessment process, toluene traded at least two other times at 272 cents/gal and 273 cents/gal, with some market sources suggesting additional transactions were also done, but this could not be confirmed.

On Thursday morning toluene was heard done at 278 cents/gal DDP USG for October. Following the deal, October was at 279-284 cents/gal FOB USG while xylenes was at 291-300 cents/gal FOB USG. It was only a matter of time before the steep discount for toluene would begin to erode, sources agreed. "The spread has been the underlying tone," one trader said. "With benzene running up, why is toluene dragging behind?" Another participant agreed, adding, "Toluene is grossly undervalued (with a spread of 20 cents below MX)." In October 2009, MX average a 10-cent discount relative to toluene, according to Platts data. Two years ago during the month of October in 2008, toluene and xylenes were virtually flat.

China Chemical Weekly: http://news.chemnet.com/en/detail-1411716.html