Toluene Prices Take a Dip: What’s Driving the Downward Trend?
Toluene prices have been revised downward, with importers reducing rates by ₹1/kg. Current prices are now at ₹72.00/kg (Ex-Kandla), ₹73.00/kg (Ex-Hazira), and ₹73.00/kg (Ex-Mumbai) on 60-day credit terms. However, trader offers exhibit slight variations, with quotes at ₹71.75/kg (Ex-Kandla) and ₹72.00/kg (Ex-Mumbai) for advance payment terms.
Chemical Price
- Toluene prices have been revised downward, with importers reducing rates by ₹1/kg. Current prices are now at ₹72.00/kg (Ex-Kandla), ₹73.00/kg (Ex-Hazira), and ₹73.00/kg (Ex-Mumbai) on 60-day credit terms.
- However, trader offers exhibit slight variations, with quotes at ₹71.75/kg (Ex-Kandla) and ₹72.00/kg (Ex-Mumbai) for advance payment terms.
- Bulk buying interest has been noted in the range of ₹70.00-71.00 Ex-Mumbai for October lifting on LC terms; however, importers are reluctant to liquidate at this level.
- Bulk consumers are adopting a cautious stance towards inventory accumulation, prompted by ongoing corrections in upstream crude oil benchmarks and backwardation in benzene futures prices.
- The FOB Korea Benzene Asian benchmark futures contract prices are as follows:
- 2H Oct FOB Korea Benzene: $912/tonne
- 1H Nov FOB Korea Benzene: $875/tonne
- 2H Nov FOB Korea Benzene: $874/tonne
- 1H Dec FOB Korea Benzene: $871/tonne
- 2H Dec FOB Korea Benzene: $870/tonne
Chemical Supply & Demand
- The supply of toluene remains abundant, with a considerable number of vessels arriving in October. However, liquidation has been low, particularly during the first half of the month, due to the Navaratri festival and a slowdown in bulk drug production. The correction in upstream crude oil and naphtha prices is contributing to bearish sentiments for toluene in October.
- Liquidation has been particularly sluggish during the first half of October, as demand from pharmaceutical manufacturers has decreased. The backwardation in future benzene contracts further exacerbates the bearish outlook.
- Demand from sectors such as packaging, printing inks, and adhesives was moderate during the initial part of October but has become robust following the Navaratri festival, driven by the upcoming Diwali demand.
- Market participants have observed that current spot prices are elevated compared to future contracts, indicating a price correction for toluene.
- India's monthly demand for toluene is approximately 57,000 metric tons (MT), with domestic producers like Reliance Industries Limited (RIL) and Bharat Petroleum Corporation Limited (BPCL) contributing around 9,600 MT. The remainder, approximately 45,000 MT, is imported each month.
- In the petrochemical cracking sector, margins for toluene disproportionation (TDP) units continue to face pressure, as the price spread between naphtha and toluene currently stands at $49/tonne, falling short of the $90/tonne breakeven spread. This situation may prompt further corrections in naphtha prices.
Chemical News
- In the international market, upstream crude oil benchmark prices have declined, with WTI dropping by 2.05% to $69.22/barrel. Natural gas prices have also seen a decrease of 3.79%, settling at $2.25/MMBtu. Additionally, FOB Singapore naphtha prices have reduced to $674/MT, while downstream FOB Korea toluene prices have fallen by $16 to $723/MT.
- Deepak Phenolics, a leading manufacturer of phenol and acetone located in Dahej, India, announced a plant shutdown on 10th Oct 2024 for annual maintenance, with operations expected to resume on 27th Oct 2024. The plant has a production capacity of 300 kt/annum for phenol and 180 kt/annum for acetone.
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Expert Opinion
- Toluene prices will exhibit mixed trends this week, reflecting the prevailing bearish market sentiment and excess inventory at ports. Buyers are advised to exercise caution when building inventories, as replacement costs are lower and feedstock prices are in backwardation.
- Therefore, buyers should consider just-in-time procurement strategies rather than engaging in bulk purchases.