The Urethane Blog

European TDI Update

Strong TDI demand boosts December toluene contract price in Europe
December 03/2020
MOSCOW (MRC) — The European toluene contract price for December settled at USD454/metric ton on Tuesday, rising USD93/metric ton, or 26%, month-on-month amid stronger demand and tighter supply, according to sources and IHS Markit data, said Chemweek.

The settled contract price in November was USD361/metric ton. The contract price is negotiated between major producers and consumers in the market and confirmed by IHS Markit once a settlement is agreed. Demand for toluene strengthened in November, when consumption from chemical players in the domestic market improved as two toluene diisocyanate (TDI) producers lifted declarations of force majeure after technical issues caused outages in September and October.

Strong TDI margins are expected to result in healthy offtake for toluene from chemical buyers, according to Eleanor Dann, principal analyst/aromatics and fibers, at IHS Markit. “We see good demand from chemicals and solvents sectors,” says one toluene supplier. “TDI reached rock bottom in August and September, not just because of the force majeures but also weaker downstream demand,” the supplier says.

Demand has grown for toluene cargoes from Europe to India and the US market, according to sources. An outage at an aromatics plant operated by the Bandar Imam Petrochemical Company in Iran siphoned off a regular supply of toluene from the Indian market between October and November. To fill the gap, at least 30,000 metric tons of toluene was shipped from West Europe to India in November, according to toluene traders. By comparison, total export volumes from West Europe to India totaled 6,000 metric tons in the first six months of the year, according to IHS Markit data.

“Export demand for toluene parcels to India is expected to persist into December, but more competitive pricing in the Asian markets and lower availability from Europe should prevent export volumes being as high as they have been in November,” says Dann.

Toluene spot supplies remain tight in Europe, supporting the 26% monthly jump in the December contract price, as traders watch for trans-Atlantic export opportunities, but find instead scant volumes available for December shipping, according to market sources. “I’m looking for toluene for the US, but nobody is offering any product for December,” says one trader.

Other factors that have contributed to low availability of spot toluene include lower refinery production rates, as gasoline demand has deteriorated during the second wave of COVID-19 lockdowns and mixed xylenes demand is capped by poor para-xylene margins.  “The spread between benzene and toluene prices has turned selective toluene dis-proportionation margins positive, which has incentivized increased toluene consumption, particularly in the US,” Dann says.

Meanwhile, reformer margins are still negative, and despite an increase in the toluene-naphtha spread of above USD50/metric ton from an October low of USD37/metric ton, poor demand for mixed xylenes is preventing refinery-based toluene producers from hiking toluene output, according to Dann. “Everyone’s minimum run rate varies, but we agree it’s low at the moment and it’s having an impact on [toluene feedstock] reformate supply,” says one producer. “We have enquiries for spot cargoes for first-half December, a lot of demand, but I don’t have spot cargoes,” the producer adds.

As MRC informed earlier, Covestro has lifted force majeure at its 270,000-metric tons/year toluene diisocyanate (TDI) plant in Dormagen, Germany.

As MRC reported earlier, Covestro has closed the sale of its European polycarbonates (PC) sheets business to the Munich-based Serafin Group effective January 2, 2020. This includes key management and sales functions throughout Europe as well as production sites in Belgium and Italy.

According to MRC’s ScanPlast report, overall estimated consumption of PC granules in the Russian market reached 58,000 tonnes in January-July 2020, up by 22% year on year (47,500 tonnes).
Author:Anna Larionova