OfBusiness Chemicals Dailies | 26th October 2023

Price

• The price of Toluene has recently seen a decrease, with importers reducing the rates by Rs.2/kg to Rs.87++ Ex Mumbai for direct customers and Rs.88++ Ex Mumbai for Traders, applicable for Advance payment terms.
• Bulk offers have been noted between Rs.93-94/kg for Hyderabad deliveries on 90-day credit terms. Traders’ offers range from Rs.88++ Ex Kandla to Rs.89++ Ex Mumbai, offered on 30-day credit terms, driven by selling pressure and further price decline.
• Domestic Manufacturer BPCL also adjusted their Toluene prices, reducing them by Rs.4/kg to Rs.91++ Ex Mumbai and Rs.92++ Ex Kochi for advance payment terms. The decline in Toluene prices can be attributed to poor downstream demand, surplus inventory at ports, and lower replacement costs.

Demand and Supply

• The recent price crash of Toluene, a staggering 26% drop from the beginning of September 2023, has been influenced by various factors.
• Despite tensions in the Middle East, Toluene prices remained unaffected due to reduced demand from primary consumers such as Bulk Drugs, Paints, and Coatings during the Ganesh Chaturthi festival in September and the Navratri festival in October, leading to limited trading activity.
• Furthermore, inventory buildup at ports, along with lower replacement costs, has put pressure on importers to sell at discounted rates for liquidation purposes.
• Other contributing factors include the poor inflation rate in China, reduced production rates by Indian Bulk Drug manufacturers, and decreased demand for US blending of gasoline, all of which have weighed heavily on the Toluene market in October 2023.
• However, the demand from Packaging, Inks, and TDI remains strong, offering hope for the long-term recovery of the Toluene market.
• Refinery cracking dynamics reveal that the cracking price spread between Naphtha to Toluene is favorable at 189$ compared to the breakeven point of 150$.
• The cracking spread between Toluene to Benzene stands at a narrow 43$ spread, significantly lower than the breakeven spread of 100$.
• Consequently, Asian TDP BTX crackers are facing pressure due to the negative conversion rate, requiring a discount in Naphtha prices for breakeven, especially as Benzene/Toluene future contracts are in backwardation.

News

• In the international market, upstream Crude oil benchmark WTI prices have decreased by 0.16% to 85.25$/barrel, while feedstock CFR Japan Naphtha prices are currently at 688$/Mt.
• FOB Korea Toluene prices were noted at 875$/Mt, while FOB Korea Benzene prices stood at 918$/Mt.
• CPC Corp, a notable cracker based in Taiwan, resumed operations in the first week of September 2023, with production capacities of 250 kt/year for Benzene, 136 kt/year for Toluene, and 150 kt for Mixed Xylene.
• Slovnaft, a leading BTX cracker in Slovakia, temporarily halted its plant operations on October 2, 2023, with a production capacity of 50 kt/year for Toluene and 60 kt/year for Mixed Xylene.
• GS Caltex, a significant PX manufacturer in Yeosu, South Korea, plans to resume operations from the last week of October 2023, with a production capacity of 550 kt/year for PX.
• Zhongjin Petrochemical, a major PX manufacturer in Ningbo, China, is scheduled for an annual turnaround this week, with a production capacity of 1.60 million metric tons per year.
• Additionally, Petronas Chemicals Aromatics, a leading PX manufacturer in Kerteh, Malaysia, plans to undergo annual maintenance starting from the first week of December 2023, with a production capacity of 550 kt/year.

OFB’s Opinion

• It is expected that Toluene prices will exhibit a mixed trend in the upcoming period, primarily influenced by the diminished demand from downstream sectors and reduced replacement costs. As a result, buyers are recommended to prioritize spot transactions over inventory accumulation until there is a reversal in the current Toluene price trajectory.