Indian Toluene Demand Cools as Consumers Hold Off Amid Price Volatility (23rd-Apr-2025)

Key Highlight Points

• Toluene prices dropped ₹2/kg due to weak sentiment and falling FOB Korea values.
• Import offers: ₹64.50–66/kg (ex-Kandla & ex-Mumbai); spot replacement cost: ₹57–58/kg.
• Demand weak from pharma; marginal activity from coatings and packaging industries.
• Refiners face margin pressure; recovery expected only if crude prices rise or naphtha corrects.

Toluene Price Trends and Replacement Cost Analysis

• Toluene bulk prices witnessed a sharp correction of ₹2/kg this week, primarily driven by bearish market sentiment and lower replacement costs.
• Importers were offering bulk deals at ₹64.50++ per kg (ex-Kandla) and ₹65.00++ per kg (ex-Mumbai) on 60-day payment terms.
• However, for traders and small-to-medium scale consumers opting for advance payment terms, importers quoted higher offers in the range of ₹65–66/kg ex-Kandla and ex-Mumbai.
• Replacement costs have now come down to the ₹57–58/kg range, as per spot FOB Korea assessments, according to a market participant.
• Some traders have begun accumulating inventory at lower price points, anticipating a possible rebound in prices driven by any uptick in upstream crude oil values. “The Indian toluene market is increasingly aligning with movements in WTI crude prices,” a trader noted.
• FOB Korea Toluene Futures:
  A. 1H May 2025: $632/MT
  B. 2H May 2025: $630/MT
  C. 1H June 2025: $630/MT

Supply-Demand Balance and Sector-wise Demand Overview

• Supply remains stable, with consistent vessel arrivals reported at Indian ports. However, liquidation continues to be sluggish, as the pharmaceutical sector – a key downstream consumer – saw a production slowdown in April. This was largely triggered by global tariff news, which affected market sentiment.
• Most end-users are refraining from fresh bookings, expecting further price corrections.
• Although the packaging, paints, coatings, and ink segments showed some level of demand, it was below industry expectations. Bulk drug manufacturers exhibited limited buying activity in the first half of April.
• From a BTX margin perspective, the naphtha-to-toluene spread has narrowed significantly to $62/MT, well below the breakeven threshold of $150/MT. However, the toluene-to-benzene spread remains lucrative at $113/MT, comfortably above the breakeven level of $90/MT. Still, BTX refiners are incurring a deficit of $65/MT.
• "A price recovery in toluene is crucial for refiners," stated a leading pharmaceutical manufacturer. Given weak demand trends in China and softening market fundamentals there, any recovery in the toluene market is unlikely before June. The deficit may ease if naphtha prices correct further.
• India's monthly toluene consumption is estimated at 57,000 metric tonnes. Domestic production, largely from Reliance Industries Ltd (RIL) and Bharat Petroleum Corporation Ltd (BPCL), contributes around 9,600 metric tonnes, with the balance of 45,000 tonnes being met through imports.

BTX Margin Pressure and Refiners' Breakeven Analysis

• On the international front, upstream crude benchmarks registered modest gains. WTI crude oil prices rose by 2.97%, closing at $64.26 per barrel. 
• In contrast, natural gas prices declined by 0.66% to $2.99/MMBtu.
• Feedstock Prices:
  1. FOB Singapore Naphtha: $570/MT
  2. FOB Korea Toluene: $632/MT
  3. FOB Korea Benzene: $745/MT

Expert Opinion: Crude Linkages and Seasonal Demand Outlook

• Market Expert projects a mixed outlook for toluene in the near term. While bearish upstream trends and falling replacement costs are exerting downward pressure, seasonal demand from the paints and coatings segment in April and May 2025 is likely to offer some support.
• Buyers are advised to build inventories during price dips, as a rebound in toluene prices could follow any rise in crude oil values.