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Thursday, August 11, 2022

US toluene/xylene spread hits 19-month low on toluene oversupply

US Gulf Coast toluene was assessed at a 15-cent discount to mixed xylene late Wednesday, its lowest since December 2013, according to Platts data.

Both toluene and xylene are coming under sustained pressure from the winding down of peak summer driving season and associated gasoline blending demand for the two chemicals.

But toluene is facing greater oversupply as a distressed cargo that has arrived in the US Gulf Coast from Asia is struggling to find buyers.

“There’s a barge that arrived from Asia with no buyers in the market,” a source said Wednesday.

Weak chemical demand for toluene has also contributed to the downward trend in prices. Toluene can be used as a feedstock via a toluene disproportionation unit to produce benzene and mixed xylene and via a hydrodealkylation unit to produce benzene. Benzene is the major use for toluene.

However, these processes have been uneconomical because of toluene being consistently priced at a premium to benzene, which has resulted in these units running at reduced rates below 50% or not running at all, sources said.

A deepening discount of toluene to xylene would further incentivize its use for the chemical production of benzene and mixed xylene as production margins improve, sources said.

After the manufacture of benzene, the second major use of toluene is the production of xylenes. The most important of the xylene isomers is paraxylene, used in the manufacturing of PTA, which is used to make PET. Mixed xylene price declines have been more gradual in comparison with toluene because of limited supply and paraxylene demand that has been slow, but enough to soften mixed xylene price declines, sources said.

US toluene was assessed at $2.42/gal FOB US Gulf Coast and mixed xylene was assessed at $2.57/gal FOB USG Wednesday.

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