Market and product
US-Asia isomer-MX arbitrage reopens on weakening US prices
The spread between benchmark isomer-MX CFR Taiwan and FOB US Gulf prices has widened to be assessed at $105.75/mt on November 27, after the FOB USG price fell 8 cents/gal ($24.24/mt) day on day to be assessed at 375 cents/gal ($1,136.25/mt), Platts data shows.
With isomer-MX CFR Taiwan assessed at $1,242/mt Friday -- unchanged from Wednesday -- the spread remains at $105.75/mt given there were no US assessments on Thursday and Friday because of the Thanksgiving holiday.
The spot freight rate to move a 5,000-mt BTX cargo from the USGC to South Korea or Taiwan is around $95/mt, making arbitrage economics workable on paper.
"[The] re-opening [of the] US-Asia isomer-MX arbitrage on paper may ease supply on a CFR Taiwan basis market, but it depends how long the arbitrage window may [last]," a Singapore-based trader said.
A trader in South Korea noted that prices in the US "tend to weaken in year-end, as producers try to reduce their inventories to avoid taxation."
The US-Asia isomer-MX arbitrage window has been shut for most of this year because of firm prices in the US, in part supported by lower output. The arbitrage window was last open on paper on July 2 -- after being shut for more than seven months -- but was shut on August 13 after the spread narrowed to $48.64/mt.
Typically, 800,000-1 million mt of US-origin isomer-MX heads to Asia each year, according to market sources.
