Lead: The US-Iran conflict has caused wide fluctuations in international oil prices, further impacting market sentiment. Driven by the oil product market, toluene has stopped falling and rebounded, but due to weak demand, market participants remain cautious about chasing price increases.
1. Shandong toluene prices fluctuate within a narrow range
During the review period, the toluene market in the Shandong region saw notable downside room for prices, as downstream demand weakened and refineries actively offloaded inventory. However, market sentiment was significantly influenced by international oil price volatility. The US-Iran conflict once again pushed oil prices higher, prompting toluene prices to stop falling and edge upward. Nonetheless, upward momentum was insufficient. Although production-to-sales ratios exceeded 100%, trading activity was primarily driven by short-covering, with weak enthusiasm for building new positions.
2. Toluene–pure benzene spread narrows
This week, the average spread between pure benzene and toluene in the Shandong region stood at RMB 1,111/mt, with HDA process processing margins at RMB 392/mt. Last week, the average spread was RMB 1,361/mt, with HDA processing margins at RMB 578/mt. The average margin for July was RMB 431/mt, up 498% month on month. With margins recovering significantly, HDA producers in the Shandong region raised operating rates to full capacity during the month, increasing toluene consumption.
During the week, toluene supply in the Shandong region remained tight, but prices were highly volatile. It was heard that no export deals were concluded.
3. Xylene–toluene spread widens but remains negative
During the week, the average spread between xylene and toluene in the Shandong region was RMB -150/mt, with toluene refineries' average production-to-sales ratio at 76%. Last week, the average xylene–toluene spread was RMB -187/mt, with the average production-to-sales ratio at 104%. The spreads between xylene and its downstream products PX and gasoline remained stable. PX plants under maintenance are about to restart and have started purchasing feedstock, but the overall external sentiment is bearish, offering limited support to the market.
4. Market outlook
Supportive factors: Cost-side support remains in place; the export window is on the verge of opening.
Bearish factors: Gasoline consumption remains very limited; fine chemical producers have maintenance plans scheduled.
For now, the geopolitical conflict in the Middle East is unlikely to be resolved in the short term, and international oil prices are expected to stay at relatively elevated levels. However, several downstream enterprises in the Shandong region have maintenance plans, and industries such as chlorination and oxidation are operating at low loads, pointing to a further weakening of the toluene supply-demand structure. Toluene prices are expected to fluctuate weakly next week, with uncertainty mainly stemming from international oil price movements.
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