Gains in US Toluene Erase TDP, MSTDP Margins as Blend Values Strengthen

Recent gains in US spot toluene prices have pushed disproportionation margins into negative territory and have dented demand from the chemical segment, S&P Global Platts data showed Monday.

Prompt-month April Toluene prices rose notably the week ended Friday, gaining roughly 13 cents throughout the week to finish Thursday's session at 277 cents/gal FOB USG. Platts did not publish prices in the US on Friday due to the Good Friday holiday. Sources said toluene prices were stronger on talk of possible short covering and as a result of recent tightness throughout the first quarter.

Sources also said gains were attributed to a lack of barge availability related to recent flooding on the Mississippi River. The gains in toluene, coupled with recent weakness in benzene pricing, have pushed disproportionation margins into negative territory with TDP and MSTDP margins near minus $82.50/mt and minus 15 cents/mt, respectively. Sources said that poor economics were likely to result in weaker toluene demand. But toluene could see some support from stronger blend values as values rose late in the week on a wider regrade. The regrade -- the spread between regular and premium gasolines -- widened to 20 cents late in the week as gains in premium gasoline prices outpaced gains in regular grade gasoline. The wider regrade lent support to toluene's octane value, and blend values rose roughly 8 cents on the week to be last estimated near 260.50 cents/gal, according to S&P Global Platts data. Toluene's blend value stood at a near 16.50-cent discount to the spot price. Still, demand from gasoline blenders was not immediately visible as toluene would need to compete with blendstocks such as reformate. Reformate's blend value was at a near 5.5-cent discount to toluene while the reformate spot price was at a near 51-cent discount to the toluene spot price. If blend demand failed to materialize, then spot values would most certainly move lower, sources said.