First Asian isomer-MX arbitrage cargo of 2017 makes its way to the US

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A 5,000 mt parcel of isomer-grade mixed xylenes that loaded from Taiwan’s Kaohsiung port on Tuesday is the first arbitrage cargo from to the in 2017, a market source said Wednesday.

The cargo, sold by South Korean producer GS Caltex on a CFR US Gulf basis in the mid-$720s/mt, is part of term deal with CPC Corp. and is the January shipment.

The cargo is likely to reach the US Gulf in early March, according to sources.

February US MX was assessed by S&P Global Platts at 241 cents/gal FOB US Gulf on Tuesday, equivalent to $730.23/mt, while the FOB marker was assessed at $676/mt, a spread of $54.23/mt.

The arbitrage is workable at a freight rate of $40-$45/mt for major Asian producers and end-users.

Platts assessed the freight for aromatics cargoes from South Korea to the US at $39.50/mt basis 10,000 mt.

The vessel, which sailed from Kaohsiung on January 10, will go to South Korea where will co-load other products before setting off for the US.

Traders were not, however, planning to take advantage of the arbitrage window opening up, market sources said.

One trader said that there was a significant amount of risk when selling isomer-MX to the US as the market there does not have a forward structure, being assessed only for January and February.

“Before selling an arbitrage cargo, you need to compare the loading month price (M1) with the price two months ahead (M3) because the voyage time from Northeast Asia to the US Gulf Coast is about 45-60 days,” the trader said.

“Those indications are difficult to come by, unlike in Asia, where we have a forward structure until H1 March right now,” he added.

A source at the seller of the cargo said, however, that the sale was possible because of the widening contango in the gasoline market.

The contango between January and March NYMEX RBOB stood at 21.37 cents/gal on Tuesday, up from 2.13 cents/gal on December 30.

Isomer-MX is occasionally used by gasoline producers as a blending component to boost octane rating, if prices are deemed favorable.

This was an indication that the US isomer-MX forward market was likely to remain firm in the near term, the seller source said.

Supply in Asia is ample at the moment, with no maintenance scheduled at any plants till early February at least, which is underpinning market participants’ hopes of the arbitrage window between Asia and the US remaining open.

 

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