Toluene Market Strong on Reduced Supply
At the beginning of 2023, domestic demand for toluene improved under the influence of policy adjustment and other factors, driving the market price and inventory of toluene to rise. Despite less-than-expected demand from the xylene market, the supply of toluene was reduced as scheduled, driving the market price to be strong and volatile. The price spread between toluene and xylene was reduced to about RMB 100/mt. In the medium and long term, the supply of toluene may remain tight, and the price is projected to further rise.
In 2023, driven by the national policy, the residents’ travel rate has increased significantly, driving the increase of gasoline consumption. Based on the expectation of a better supply and demand relationship in 2023, the market participants aggressively made deals, which promoted the market price and inventory of toluene to rise. After the Spring Festival holiday, due to the high inventory pressure and the profit-taking activities, the toluene price fell in a narrow range. However, the overall demand for oil blending was acceptable, and the supply of toluene was reduced, making the toluene market easy to rise and difficult to fall.
The supply decreased as scheduled, giving strong support to the domestic toluene market.
In 2023, the new capacity of toluene was intensive, but most enterprises are integrated enterprises. The toluene they produce is mainly for their own use, and only less than 8% of the enterprises will sell their products to the market.
As the toluene disproportionation unit at Ningbo Daxie Petrochemical was put into operation, the supply circulation of toluene in the market continued to decrease. After the 20 new regulations were released, citizens' willingness to travel increased, and the demand for oil blending increased significantly compared with the second half of 2022. The self-consumption of toluene producers increased, and the resources in circulation remained relatively low. The operating rate at producers in Japan and South Korea was low, and the local toluene supply continued to be tight, leading to small toluene imports in China. Therefore, in the case of increased downstream demand and tight supply at home and abroad, the total domestic supply of toluene decreased as predicted, which gave strong support to the toluene price.
The steady increase in demand boosted the domestic toluene market.
The demand for fine chemicals recovered less than expected after the Spring Festival holiday, but the total demand still maintained the growth trend. During the Spring Festival, the residents’ travel hit a peak, boosting the price of gasoline to rise. After the holiday, the demand for oil blending was still good, which continued to buoy the toluene price. In addition, driven by the continuous improvement of the macro news, most market participants had strong confidence in the future market and were reluctant to sell, which promoted the steady rise in the domestic toluene price.
In general, the domestic toluene market is expected to show an upward trend in 2023, driven by favorable news such as the reduction of the market circulation of goods, the improvement of economic expectations, the decline of imports and the steady growth of demand.
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