Asian Isomer-MX Xylene Traders Are Eying Opportunities to Make The Reverse Arbitrage

Asian isomer-grade mixed xylene traders are eying opportunities to make the reverse arbitrage movement from Northeast Asia to the US Gulf Coast given the recent widening of prices between both regions, traders said Wednesday.

Several traders said Asian traders were looking at the possibility to ship some prompt cargoes for end-May and early-June loading from Northeast Asia to the USGC.

Asia is structurally short on isomer-MX and usually imports from the US, so a reverse arbitrage from Asia to the US would be rather unusual, sources noted.

US spot MX prices hit a two-month high Tuesday, rising 1 cent/gallon to be assessed at $4.20/gal ($1,272.60/mt) FOB US Gulf for May loading cargoes and at $4.21/gal for June cargoes.

The rise was attributed to limited supply, amid rising demand for gasoline blending ahead of the summer driving season as well as increased downstream paraxylene production, industry sources said this week.

Asian isomer-MX prices however, were under pressure from lower paraxylene prices, falling $1/mt day on day to be assessed at $1,201.50/mt FOB Korea Tuesday for June loading cargoes.

This resulted in a spread of $74.10/mt between the two price benchmarks, above the freight cost of $62-67/mt to move a 10,000-mt from South Korea to the USGC. The voyage from South Korea or Japan to the USGC takes at least four weeks.

But some Asian trade sources noted that bids for July arrival cargoes were no higher than $4-4.15/gal in the US this week, making actual arbitrage movements "difficult."

"Even if you load here in early June it will most likely reach the US in the second half of July and by that time the driving season would have ended and you might end up with a hot potato," a trader said.