Lead: International oil prices fell 3%, while related aromatics futures dropped more than 5%. The trend of related products turned sharply, and the toluene market followed the decline in a wait-and-see manner.
1. Shandong Toluene Prices Remained Relatively Strong
At present, the US–Iran relationship remains deadlocked, and supply concerns persist. During the period, Brent crude oil prices traded above USD 90/barrel, providing strong cost support to the commodity market. As the US and Iran returned to negotiations and are expected to reach an agreement, international oil prices moved downward. However, related aromatics futures products entered a downward channel, with some products hitting the limit-down. External sentiment turned bearish, and toluene market prices retreated.
Table: Comparison of prices from production enterprises in Shandong region (USD/barrel, USD/ton, CNY/ton)
| Product | Region | Aug 25 | Aug 3 | Change | Change % |
|---|---|---|---|---|---|
| Brent | Futures | 88.58 | 83.77 | 4.81 | 5.74% |
| WTI | Futures | 83.26 | 80.34 | 2.92 | 3.63% |
| Naphtha | CFR Japan | 814 | 781.13 | 32.87 | 4.21% |
| Toluene | Shandong | 7375 | 6435 | 940 | 14.61% |
From the current perspective, international crude oil prices are oscillating at high levels, and toluene prices have risen significantly more than crude oil within the month. However, toluene prices are estimated to have corrected relative to the beginning of the month, so the cost side still provides some support to the market, albeit weaker than in the early period. Recent gasoline market demand has been healthy, providing fundamental support to the toluene market.
2. Toluene–Benzene Spread Narrowed
This week, the average spread between benzene and toluene in the Shandong region was 739 CNY/ton, and the processing profit for the HDA process was -42 CNY/ton. Last week, the average spread between benzene and toluene in Shandong was 1,006 CNY/ton, and the HDA processing profit was 221 CNY/ton. The average profit in July was 431 CNY/ton, up 498% month-on-month. The average profit in August was 164 CNY/ton, down 62% month-on-month.
Recently, benzene price increases have been weaker than toluene, deepening losses in the downstream HDA industry.
3. Xylene–Toluene Spread Widened; Gasoline Demand Provides Strong Support for Xylene
During the week, the average spread between xylene and toluene in Shandong was 154 CNY/ton, and the average production-sales ratio of toluene refineries was 45%. Last week, the average spread between xylene and toluene in Shandong was 98 CNY/ton, and the average production-sales ratio of toluene refineries was 84%. The spread between xylene and the downstream PX industry narrowed, and the monitored profit of the short-cut process turned negative. The poor economics resulted in no purchase inquiries from PX enterprises during the period. Meanwhile, the toluene-xylene spread was maintained, and gasoline industry profits remained acceptable, making it the main demand support.
4. Market Outlook
On Wednesday, related aromatics futures prices fell sharply, and the external commodity market sentiment turned quickly. The toluene market’s wait-and-see sentiment increased. Meanwhile, multiple enterprises in the downstream fine chemical industry shut down their units. The benzene-toluene spread and the PX-xylene spread were both below breakeven levels, further adding to the bearish atmosphere in the market. Although the gasoline industry currently provides price support through stable consumption, its consumption volume is lower than the toluene supply. Therefore, refineries are expected to accumulate inventories, and the short-term downside risk for prices is rising.
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