There have been some noticeable changes in the origins of China’s toluene imports since the third quarter. The volume of imports from South Korea and the proportion that it takes has dropped from a quarter before.
1. South Korea’s exports in Q3
According to the data released from the customs, South Korea’s toluene exports sustained at average level in July and August. However, the portion that was exported to China shrank notably, which was because that Taiwan, Indonesia and Singapore took in more production. In September, exports from South Korea were slashed considerably, as local TDP margins and gasoline blending profits were attractive enough for producers not to export.
2. Sporadic South Korean plant turnaround in Q4
Plant turnaround schedules are limited in Q4 in Asia, let alone in South Korea. Monthly exports from South Korea are likely to maintain average amount, without impact from plant shutting down or cutting operating rates.
||Toluene capacity (kt/yr)
||Yeosu, South Korea
||To close for 5 days in Nov to replace catalyst
||Map Ta Phut, Thailand
||T/a from end-Oct, 40 days
||Incheon, South Korea
||T/a from Sep 22, restarted in end-Oct
|JX Nippon Oil & Energy
||Closed on Sep 21 due to fire accident
||Kaohsiung, No. 6
||T/a from Oct 1 to mid-Nov
3. Lower TDP margins
Margins of toluene disproportionation process may be crunched, even below break-even line in South Korea in Q4. Therefore, some toluene producers may get incentivized to sell more products. In other news, Ulsan Aromatics, a joint venture of SKGC and JX Nippon Oil & Energy, plans to close its aromatics unit in mid-Nov for maintenance lasting 14-15 days. The unit uses C9 mixed aromatics and toluene as feedstock to produce benzene and PX. Hence, some market players believe that South Korea’s toluene exports are unlikely to decrease.
4. Asia to US arbitrage closed
The arbitrage window of trading toluene cargo from Asia to the US has been closed since Sep, as FOB USG price has fallen below FOB Korea price. The arbitrage window is unlikely to open anytime soon.
In a conclusion, South Korea’s toluene exports may normalize to average level in Q4, and the proportion to China may increase.