South Korea’s TDP Margins Turn Negative for First Time Since March
South Korea’s toluene disproportionation margins—which measure the profitability of converting toluene into downstream benzene and mixed xylenes or MX—turned negative on Sept. 11, falling to minus $3.20 per metric ton FOB Korea. The dip snapped a six-month streak of positive margins, according to market data from OPIS.
The last time TDP margins dipped into negative territory was on March 25, when they stood at minus $14.28/mt, according to OPIS data. Sustained negative margins typically prompt producers to reduce their TDP operating rates or shut down plants entirely.
Crude oil prices rose sharply last week following escalating tensions in the Middle East, which saw U.S. launching strikes on Iranian tankers and Houthi attacking Saudi energy facilities. Front-month November ICE Brent crude oil futures climbed from $97 per barrel on Sept. 7, peaking at $107.63/bbl on Sept. 10 before falling to $104.61/bbl by the next day.
A sharp surge in energy costs trickled down into the aromatics market, driving up spot prices across toluene, benzene and MX. Following strong gains during the week, FOB Korea prices settled on Sept. 11 at $1,213/mt for benzene, $1,181/mt for toluene, and $1,149/mt for MX, according to OPIS data.
Toluene prices drew ongoing support from tight regional supply, driven by low inventories in China which restricted export flows to South Korea. Supply was constrained further by reduced steam cracker operating rates and upcoming maintenance turnarounds at South Korean toluene plants.
In South Korea, Lotte Chemical’s Daesan cracker and benzene, toluene and xylene units shut down on Sept. 1 as planned, reducing regional toluene supply. Yeochun NCC Co (YNCC)’s 117,000 mt/year toluene plant in Yeosu is also slated to begin a routine three-month maintenance in September, adding to the country’s toluene supply squeeze.
In addition, upcoming plant maintenances in October by SK Geo Centric Co.’s 400,000 mt/year toluene plant in Ulsan, SK Incheon Petrochem Co.’s 590,000 mt/year toluene plants in Incheon, LG Chemical’s 150,000 mt/year toluene plant in Yeosu and Korea Petrochemical Industries Co.’s 100,000 mt/year toluene plant in Ulsan are expected to further constrain toluene supply in the market.
Concurrently, refiners prioritized fuel production over aromatics output, driven by surging energy prices and favorable gasoline blending economics. According to Chemical Market Analytics by OPIS, toluene’s estimated gasoline blend value increased by $88/mt to $1,148/mt and above the weekly average OPIS spot toluene price of $1,132/mt FOB Korea.
Integrated refiners have favored keeping toluene in the gasoline pool over extracting it for the merchant market. This has restricted spot toluene availability and pushed toluene prices high enough to render TDP operations economically unviable. As a result, most TDP, toluene transalkylation and paraxylene units across Asia—excluding China—continue to run at reduced operating rates.
On the other hand, while gasoline blending demand has risen, the upside remains largely confined to the Asian market. Although the Asia-to-U.S. arbitrage theoretically remains open, export volumes from South Korea are expected to stay limited. Furthermore, cargoes loaded in October will arrive in November or December, when U.S. buyers typically curb stockpiling to avoid year-end business inventory taxes.
South Korean toluene supply is expected to stay tight into October. However, the end of the Golden Week holidays peak travel season in China in early October may reduce demand for toluene in the domestic Chinese market and increase toluene export availability, offering relief to South Korean buyers. In the first seven months of this year, South Korea imported a total of 260,405.9 mt of toluene from China, an increase of 106.4% year on year, customs data shows.
–Reporting by Serena Seng, serena.seng@dowjones.com; Editing by Mei-Hwen Wong,
mei-hwen.wong@dowjones.com