Indian Toluene Prices Fall as Bulk Buyers Hold Back Amid Declining Feedstock Costs

Key Takeaways:

• Toluene prices have dropped by ₹1/kg due to falling upstream feedstock naphtha costs.
• Ample Toluene supply at Indian ports follows slowed demand during the festive season.
• Expected demand from pharmaceuticals and the coatings sector could stabilize prices.
• International feedstock and crude oil prices are similarly declining, indicating weaker global sentiment.
• Plant maintenance at FCFC in China might impact Para-Xylene and Ortho-Xylene availability.

Toluene Costs Drop Amid Reduced Demand and Falling Feedstock Prices

• Importers have reduced Toluene prices by ₹1/kg, now offering the Toluene at ₹72++ per kg on an ex-Kandla basis and ₹73++ per kg on an ex-Mumbai basis for 60-90 day credit terms.
• Traders are quoting slightly lower rates at ₹71++ per kg ex-Kandla and ₹72++ per kg ex-Mumbai for advance to 30 days payment terms.
• Feedstock naphtha prices have plummeted by nearly $30 in the last three days, leading to a sharp drop in Asian benchmark FOB Korea Toluene prices, which declined by approximately $25/MT.
• This week saw limited bulk transactions as major buyers held back on purchases due to weak upstream dynamics, particularly in the crude oil and naphtha markets. On a week-on-week basis, Toluene prices declined by ₹4/kg, primarily driven by bearish market sentiment and reduced replacement costs.

Chemical Supply & Demand: Ample Stock Following Festive Slowdown at Major Ports

• Market sentiment for Toluene has weakened as upstream crude oil benchmarks and naphtha prices have crashed. With the formula pricing dropping, replacement costs are expected to remain lower.

• Supply levels at major Indian ports are currently ample. This surplus is mainly due to slow liquidation in October 2024, following reduced downstream production during the Navaratri and Diwali holidays.

• However, demand is expected to pick up in November, especially from the bulk drug manufacturing sector, as production of key pharmaceutical ingredients such as Sartans (Losartan, Valsartan, Telmisartan), Dichlorophenylacetone, Diclofenac, and Ciprofloxacin is set to increase.

• Furthermore, the resumption of the paints and coatings season is anticipated to provide long-term support for Toluene demand.

• The dynamics for BTX crackers remain mixed. The Naphtha-to-Toluene price spread is currently at just $55, compared to the breakeven spread of $150, while the Toluene-to-Benzene price spread remains healthy at $200, above the breakeven spread of $90.

• Given these factors, there is potential for a recovery in Toluene prices, though demand will need to show significant strength, as noted by a leading industry source.

• India's monthly Toluene demand stands at approximately 57 kt, with domestic producers such as Reliance Industries Ltd (RIL) and Bharat Petroleum Corporation Ltd (BPCL) supplying around 9.6 kt per month. The remaining demand, about 45 kt, is met through imports.

Market News: Downward Trends in Crude Oil and Feedstock Naphtha Prices

• On the international front, upstream crude oil benchmark WTI prices decreased by 0.58%, settling at $68.03 per barrel, while natural gas prices slightly dipped by 0.97% to $2.95/MMBtu.
• Feedstock FOB Singapore naphtha prices declined by $25 over the past three days, reaching $625/MT. Meanwhile, FOB Korea Toluene prices fell by $25 to $680/MT, and FOB Benzene prices dropped by $5 to $880/MT.

Plant News: Major Maintenance at FCFC Expected to Impact Xylene Production

• Formosa Chemicals & Fibre Corp (FCFC), a major producer of Para-Xylene and Ortho-Xylene based in Huizhou, China, initiated a plant shutdown in the first half of October 2024 for annual maintenance.
• The turnaround is expected to last until mid-November 2024. The plant has a production capacity of 870 kt per annum.

Expert Opinion on Chemical Market Trends in Upcoming Day

Mixed trend in Toluene prices for the upcoming week due to prevailing weak trading sentiments. Is expected. However, anticipated demand from the pharmaceutical sector and the seasonal uptick from the paints and coatings industry are likely to provide some stability to Toluene prices in the near term.