[Introduction]: The situation in the Middle East remains volatile, and international crude oil prices fluctuate widely along with it, but prices show a downward trend. Bearish sentiment in the commodity market is increasing. Toluene refineries in the Shandong region are clearing inventory to sell, and listing prices have fallen.

1. Shandong toluene prices continue to decline

The easing of the Middle East situation, influenced by news of US-Iran peace negotiations, has led to a broad decline in international crude oil prices. Prices of related external aromatic products have collectively fallen. It has become difficult for toluene refineries in the Shandong region to maintain stable prices, with refineries' listing prices dropping back to pre-holiday levels. However, overall shipment volumes from toluene refineries this week were acceptable. Enterprises continued to maintain low inventory levels, and spot bidding at a few companies even saw premiums. A temporary shutdown of a reforming unit at Tianjin Petrochemical has led to an increase in toluene outflow from Shandong.

2. Toluene-benzene price spread widens

This week, the average price spread between benzene and toluene in Shandong was 1,797 CNY/ton, with the HDA process processing profit at 981 CNY/ton. Last week, the average benzene-toluene price spread in Shandong was 1,766 CNY/ton, with the HDA processing profit at 950 CNY/ton. Since April 15, the gross profit margin for HDA enterprises in the Shandong region has remained above 1,000 CNY/ton. However, due to the limited price spread between xylene and toluene, the interest of the disproportionation industry in purchasing toluene is very limited.

Shandong Ruilin Chemical's HDA unit is scheduled to start feeding raw materials in mid-month. The company has been sequentially purchasing start-up materials this week, increasing its consumption of toluene.

3. Xylene-toluene price spread widens but remains negative

This week, the average price spread between xylene and toluene in Shandong was 116 CNY/ton. The average production-to-sales ratio for toluene refineries was 83%. Last week, the average xylene-toluene price spread in Shandong was 71 CNY/ton, with the average production-to-sales ratio for toluene refineries at 124%. Gasoline companies have high inventory levels, and end-user demand remains weak. Although toluene prices have fallen, it has not been enough to stimulate purchasing from the gasoline industry.

4. Future Outlook

Positive factors: Severe losses in reforming units, providing good cost-side support; export window is open; downstream benzene production plants are scheduled to start up.

Negative factors: Gasoline consumption is very limited.

Export discussions for toluene were favorable this week, with replenishment expectations in the market. Additionally, independent refineries are experiencing significant losses, so producers have very limited willingness to lower prices. Therefore, the potential for further decline in Shandong toluene prices is very limited. At the same time, two downstream benzene production plants are scheduled to start up, which is expected to increase toluene consumption. Short-term positive factors are temporarily dominant, and Shandong toluene prices may have room for a slight increase. However, the recurring volatility of the Middle East situation is causing repeated fluctuations in international crude oil prices, increasing the uncertainty of toluene price movements.