Lead: Recently, toluene prices have continued to climb. As of September 2, the toluene market price in East China reached 7,935 RMB/mt, up 790 RMB/mt week on week, marking the highest level since mid-April.
1. Toluene prices run firm
The US–Iran conflict is still ongoing, and some oil tankers have been attacked near the Strait of Hormuz, intensifying market participants’ concerns over geopolitical supply disruptions. This has pushed international oil prices back above USD 90/bbl. Combined with cost-side support and gasoline demand, average toluene prices in regional markets rose by more than 10% during the week.
Table: Price comparison of toluene and feedstock products (USD/bbl, USD/mt, RMB/mt)
| Product | Region | Sep 2 | Aug 27 | Change | Change % |
|---|---|---|---|---|---|
| Brent | Futures | 95.63 | 89.7 | 5.93 | 6.61% |
| WTI | Futures | 91.01 | 83.53 | 7.48 | 8.95% |
| Naphtha | CFR Japan | 858 | 810.5 | 47.5 | 5.86% |
| Toluene | Jiangsu | 7935 | 7050 | 885 | 12.55% |
In the Jiangsu market, despite the arrival of shipborne cargoes as replenishment, circulation of toluene vessel lots remained tight. Buying interest from the TDI sector was relatively strong, and tank farms continued to see lifting against vessel orders, keeping inventory still near historical lows. Because the upward price momentum mainly came from a sentiment premium, downstream players were cautious about chasing further gains.
2. Xylene–toluene spread widens; gasoline demand provides strong support
During the week, the average xylene–toluene spread in Shandong was 248 RMB/mt, and the average production-to-sales ratio at toluene refineries was 82%. In the previous week, the average spread was 253 RMB/mt, and the ratio was 41%. The spread between xylene and the downstream PX segment narrowed, and the monitored short-process margin turned negative. Poor economics resulted in no PX enterprises making purchase inquiries during the period. Meanwhile, the toluene–xylene spread was maintained, and gasoline industry margins remained acceptable, providing the main demand support.
3. Market outlook
In the near term, as wholesale and retail gasoline prices in some domestic regions have reached or approached the price ceiling, the economics of blending toluene into the gasoline pool have been challenged, and market sentiment for further gains has quickly cooled. International oil prices are still expected to remain high, providing support from the cost side. However, demand is being squeezed, and export negotiations are stalled. Toluene market supply-side pressure is gradually building, with intensified multi-party tug-of-war. Upside room is limited, and short-term prices are likely to consolidate at a high level in a narrow range, with a slightly weak bias.
On the supply side, toluene supply from Panjin Baolai, Xinyue Chemical, and Sinopec Zhongke Refining & Chemical is expected to materialize in September. Anqing Petrochemical has a maintenance plan for mid-to-late September, but the reduction will be smaller than the increase in supply. On the demand side, the spread between pure benzene and toluene has yet to recover, and HDA operators have low buying interest in toluene. In the TDI sector, Wanhua Yantai has returned from maintenance, but the incremental demand for toluene has not yet been reflected. In the gasoline sector, the xylene–toluene spread remains sufficient to support the economics, providing downstream demand support. On the news front, gasoline exports are scheduled to drop sharply in September, leaving uncertainty over toluene entering the gasoline pool. Overall, under cost-side pressure and weaker supply-demand fundamentals, bearish factors are likely to dominate and weigh on the toluene market.
Looking at the next three months, instability in US–Iran relations will continue to cause wide swings in international oil prices and will have a dominant impact on market sentiment. In September, the toluene supply-demand structure is turning weaker, with supply likely to shift from a tight balance back to an oversupply. Export negotiations remain difficult, and apparent sales pressure in the toluene market will further influence prices. In October, Huajin Aramco’s large refining and petrochemical unit will be commissioned, increasing refined product output. The market conditions that had been supported by July–August gasoline demand may return, and toluene’s dependence on export market negotiations will increase. In November, seasonal off-season demand will pressure the domestic market, while Huajin Aramco also has external toluene pre-sales. Rising supply-demand conflicts point to further downward expectations for toluene prices.
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