Petrotahlil-US benzene production from toluene conversion is expected to take a hit in April as disproportionation margins fell in negative territory following recent gains in toluene.
TDP and MSTDP margins on a spot basis flipped into negative territory this week and were estimated near minus $178.50 and minus $37/mt, respectively, Friday.
Toluene disproportionation units use toluene as a feedstock to produce benzene and xylenes. At full rates, US benzene production from toluene conversion is estimated to be near 1.2 million mt/year.
While mixed xylene prices have been strong since mid-February, recent gains in the toluene market, coupled with some softening in the PX spot price, have negatively impacted margins. US toluene prices have risen more than 24% since the beginning of the year and prompt spot barges were assessed last at 263 cents/gal.
Sources expected toluene prices to remain strong in the near term on the back of logistical constraints associated with a tank fire at Intercontinental Terminals Company near Houston, which engulfed some 80,000 barrels of toluene.
Additionally, a recent surge in toluene's blend value has lent support to toluene, sources said. Toluene's blend value climbed to just under 266.50 cents/gal midweek on the back of stronger regrade values.
The higher toluene prices offset recent gains in benzene values, which have risen over 11% since the beginning of March and were heard traded near 230 cents/gal midweek.
Sources said that curtailed benzene output would only further support strong pricing in the near term, noting that the market was already struggling with supply constraints associated with producer maintenance, logistical constraints from high Mississippi River levels and anticipated declines in US benzene imports.
South Korea, the primary exporter of benzene to the US, has significantly reduced volumes in recent months, with February imports falling to as low as 12,000 mt, KITA data showed.
March levels were higher at just over 29,500 mt for the first three weeks of the month but remained well below historical levels, which can range anywhere from 60,000 mt to 100,000 mt.
All of these factors were expected to keep April benzene values higher and ultimately lead to an increase in the April benzene contract price in the US. The stronger contract could help boost toluene conversion margins, however, with toluene poised to remain firm and expectations of a flat to lower PX contract price, disproportionation margins were unlikely to improve significantly, a source said.
Benzene break-even levels for MSTDP units on a spot basis were at 246 cents/gal while paraxylene break-even levels were at $1,048/mt, according to Platts estimates.