India’s Toluene Market Sees Bearish Trend; Pharma Demand Signals May Revival

Key Highlights

1. Toluene bulk prices fell to ₹64–64.50/kg ex-Kandla/Mumbai on advance payment; replacement costs are below ₹58/kg.
2. Demand recovery is visible in bulk drugs and moderate in packaging, coatings, and inks. 
3. Margins are squeezed with toluene spreads well below breakeven; refiners require price recovery.
4. Crude oil gains and downstream optimism may stabilize prices in coming weeks.

Price Correction Driven by Sentiment & Low Replacement Costs

• Toluene bulk prices witnessed a correction this week, declining by ₹1/kg, primarily driven by bearish market sentiment and reduced replacement costs.
• Importers were offering bulk deals at ₹64.00++ per kg (ex-Kandla) and ₹64.50++ per kg (ex-Mumbai) on advance payment terms.
• Bulk deal interest was noted in the ₹60–62/kg range on 90-day LC terms. However, importers remained uninterested at these levels, as upstream crude oil prices showed signs of recovery after hitting a four-year low, according to a market participant
• Replacement costs have fallen to below ₹57–58/kg, a trader added.
• Several traders have built inventory at around ₹63/kg ex-Kandla, banking on expectations of a price rebound.
• FOB Korea Toluene Futures:
  A. 1H May 2025: $670/MT
  B. 2H May 2025: $670/MT
  C. 1H June 2025: $660/MT

Supply Stable, Demand Improving in Pharma and Coatings

• Supply remained stable, with regular vessel arrivals at Indian ports. However, liquidation remained sluggish. The pharmaceutical sector—one of the key downstream consumers—witnessed a production slowdown in April, though activity has started to pick up, a trader noted.
• Most end-users are adopting a wait-and-watch approach, given the lower replacement cost environment.
• Other downstream sectors such as packaging, paints, coatings, and inks displayed moderate demand. Bulk drug manufacturers, who exhibited limited buying interest in April, are showing a firm recovery in May 2025—an encouraging sign for the market.
• From a BTX margin standpoint, the naphtha-to-toluene spread has narrowed considerably to $77/MT, well below the breakeven threshold of $150/MT. Meanwhile, the toluene-to-benzene spread remains negative at just $43/MT, far below the breakeven level of $90/MT. This indicates an urgent need for a price increase in toluene to support refiner economics.
• “A price recovery in toluene is crucial for refiners,” said a leading indentor. With an uptick in downstream demand and a recovery in upstream crude oil prices, toluene prices are expected to find support.
• India’s monthly toluene consumption is estimated at 57,000 metric tonnes. Domestic production, primarily from Reliance Industries Ltd (RIL) and Bharat Petroleum Corporation Ltd (BPCL), contributes around 9,600 metric tonnes, with the remaining 45,000 tonnes met through imports.

Market News: Market Signals from Margins and International Prices

• In international markets, upstream crude benchmarks recorded modest gains. WTI crude oil prices rose by 0.78%, settling at $59.55 per barrel. Natural gas prices also moved up by 3.50% to $3.58/MMBtu.
• Feedstock Prices:
  1. FOB Singapore Naphtha: $550/MT
  2. FOB Korea Toluene: $627/MT
  3. FOB Korea Benzene: $670/MT

Expert Opinion: Rebound Likely as Crude Recovers

• Market maintains a stable near-term outlook for toluene. However, the recovery in upstream crude oil trends and a pick-up in downstream demand are likely to provide price support.
• Buyers are advised to build inventories during price dips, as a rebound in toluene prices could follow any sustained rise in crude oil values.