Backwardation Benzene Futures Hint at Bearish Sentiment for Toluene Ahead

Key Highlights

• Domestic toluene offers rose to ₹67–68/kg amid holiday disruptions.
   
• Pharma demand likely to recover, but paints and coatings remain weak.
   
• Imports and higher domestic output may ease supply tightness soon.
   
• Refinery margins under pressure; Asian benzene futures show bearish trend.

Price Trends: Festive lull lifts domestic toluene offers

• Domestic toluene prices increased by ₹1/kg this week, largely driven by limited market activity during the Ganesh Chaturthi holiday period. With major importers offline, traders offered higher prices amid restricted supply.
• Current Market Offers for 60-day credit terms;
  1. ₹67.00++/kg ex-Kandla
  2. ₹68.00++/kg ex-Mumbai
• No bulk deals were reported, as bulk drug manufacturers deferred procurement until regular market activity resumes.
• Downstream demand from pharma, paints, and coatings remained sluggish due to monsoon-related production disruptions.

Asian Benchmarks – Benzene FOB Korea Futures (Bearish Trend)

a. 2H Aug 2025: $734/MT (↓ $4 WoW)
b. 1H Sep 2025: $729/MT (↓ $8 WoW)
c. 2H Sep 2025: $728/MT (↓ $6 WoW)

Supply & Demand: Pharma outlook steady, coatings remain weak

• Supply conditions improved as domestic producers ramped up output, while multiple import cargoes are expected in the second half of August.
• Pharmaceutical demand is projected to recover in the coming weeks, lending some optimism.
• An importer noted that most bulk buyers had already secured inventories last month, limiting fresh demand in the near term.
• Demand from packaging, inks, paints, and coatings remains weak, with sentiment weighed down by monsoon-related disruptions.
• US and Russian officials discussed potential energy cooperation alongside Ukraine peace talks, easing concerns on supply issues.

BTX Margin Outlook :

• Refinery margins remain under pressure:
• Naphtha-to-Toluene spread: $100/MT (below breakeven $150/MT)
• Toluene-to-Benzene spread: $53/MT (below breakeven $90/MT)
• India’s monthly toluene demand is ~57,000 MT, with domestic producers (RIL, BPCL) supplying ~9,600 MT. Imports (~45,000 MT) continue to account for the bulk of consumption.

Global Signals: Asian benzene futures turn bearish

Feedstock & Energy Trends

• WTI Crude Oil: ↓ 0.20% to $64.02/barrel
• Natural Gas: ↓ 0.52% to $2.87/MMBtu
• FOB Singapore Naphtha: $581/MT (↓ $5)
• FOB Korea Toluene: $681/MT (↓ $5)
• FOB Korea Benzene: $734/MT (↓ $5)

Expert Opinion: Margins squeezed, imports to balance supply

• The domestic toluene market is showing short-term strength, largely supported by the limited offers during the festive holiday period. 
• However, underlying fundamentals remain weak, with sluggish offtake from pharma, paints, coatings, and bulk drug segments due to monsoon-related disruptions.
• While Asian benzene futures continue to signal a bearish outlook.