Introduction: International oil prices remain subject to bullish forecasts as supply continues to lag demand, and domestic refineries widely report that crude supply is still tight. As a result, toluene has continued its relatively firm trend.
1. Shandong toluene prices fluctuate within a narrow range
At present, the Strait of Hormuz has not yet been fully reopened, and market concerns have pushed international oil prices higher. With cost providing the main bullish support, the toluene market has been moving upward with fluctuations.
Table 1 Comparison of producer prices in Shandong (yuan/tonne)
| Product | Region | Aug 20 | Aug 3 | Change | Change % |
|---|---|---|---|---|---|
| Brent | Futures | 93.78 | 83.77 | 10.01 | 11.95% |
| WTI | Futures | 87.83 | 80.34 | 7.49 | 9.32% |
| Naphtha | CFR Japan | 823.75 | 781.13 | 42.62 | 5.46% |
| Toluene | Shandong | 7081 | 6435 | 646 | 10.04% |
On the Shandong market front, despite weak demand from the fine chemical sector and the maintenance shutdown of Lihuayi’s unit, toluene producers hold almost no inventory. In addition, active discussions in the gasoline sector have kept toluene demand at a reasonable level, while arbitrage flows with surrounding regions remain sustained. The tight supply-demand balance has supported continued premiums at toluene refinery auctions, pushing prices back above 7,000 yuan/tonne.
2. Toluene-benzene spread narrows
This week, the average benzene-toluene spread in Shandong was 1,037 yuan/tonne, with HDA process processing profit at 251 yuan/tonne. Last week, the average benzene-toluene spread in Shandong was 797 yuan/tonne, with HDA processing profit at 54 yuan/tonne. The average profit in July was 431 yuan/tonne, up 498% month-on-month. The average profit in August was 185 yuan/tonne, down 57% from July, leaving some enterprises near the breakeven level. In addition, Lihuayi entered its maintenance period last weekend, reducing its toluene consumption.
3. Xylene-toluene spread widens, but remains negative
During the week, the average xylene-toluene spread in Shandong was 77 yuan/tonne, and the average production-to-sales ratio at toluene refineries was 88%. Last week, the average xylene-toluene spread in Shandong was 45 yuan/tonne, and the average production-to-sales ratio at toluene refineries was 82%. The spreads between xylene and its downstream PX and gasoline remained intact. PX units under maintenance made concentrated procurement purchases during the week, further boosting xylene prices and supporting toluene market sentiment.
Meanwhile, after bulk refined oil transactions in Shandong hit a record high in July, more than 200,000 tonnes of gasoline bulk deals are still expected in September. Consumption of aromatics feedstock remains high, and toluene consumption from the gasoline sector remains sustainable.
4. Market outlook
From the current perspective, international oil prices are still met with bullish forecasts due to supply falling short of demand, and domestic refineries generally indicate that crude supply remains tight, providing solid cost support to the toluene market. Recent active negotiations in the gasoline sector have increased toluene consumption, partly offsetting the decline in demand from the fine chemical industry. However, the export window is currently poor, September export negotiations in the domestic market have been mediocre, and several previously idled units are returning to the market in September. As a result, the supply-demand game in the toluene market continues.
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