Toluene Market Sees Mixed Signals with High Inventories and Benzene Backwardation

Key Takeaways

• Price Drop: Toluene prices are down by Rs 1/kg, with rates at Rs 71.00/kg (Ex-Kandla) to Rs 73.00/kg (Ex-Mumbai).
• Sufficient Supply: Toluene supply remains ample, driven by vessel arrivals, although no Iran cargoes are anticipated soon.
• Moderate Demand: Demand saw moderate growth after Navaratri, led by packaging and printing inks, though bulk buying remains limited.
• Market Outlook: Benzene futures are in backwardation, applying pressure on toluene prices and keeping inventory strategies conservative.
• Expert Advice: Just-in-time purchasing is recommended to avoid holding high-cost inventories due to excess port stocks.

Chemicals Price

• Toluene prices have seen a downward adjustment, with importers reducing rates by Rs 1/kg. Current prices now stand at Rs 71.00/kg (Ex-Kandla), Rs 72.00/kg (Ex-Hazira), and Rs 73.00/kg (Ex-Mumbai) on advance terms. Trader offers vary slightly, quoting at Rs 71.75/kg (Ex-Kandla) and Rs 73.00/kg (Ex-Mumbai) for 30-day payment terms.

• Bulk buying interest has emerged in the Rs 67.00-70.00/kg range Ex-Mumbai for November lifting, though importers remain hesitant to liquidate at these levels. Large-scale consumers are cautious about building inventories due to ongoing corrections in upstream crude oil prices and a backwardation trend in benzene futures.

• The FOB Korea Benzene Asian benchmark futures are currently priced as follows:

• 1H Nov: $880/mt

• 2H Nov: $879/mt

• 1H Dec: $876/mt

• 2H Dec: $876/mt

• 1H Jan: $873/mt

Chemicals Supply & Demand Dynamics

• Toluene supply is ample, with a significant number of vessels arriving in October, although no Iran cargoes are expected through at least early November. Liquidation rates have been low, partly due to the Diwali holidays and a slowdown in the bulk drug sector, which has contributed to bearish market sentiment.
• The backwardation in benzene futures contracts is further pressuring the market outlook. Initial demand from packaging, printing inks, and adhesives was moderate in early October but has since picked up following Navaratri, spurred by the upcoming Diwali season.
• Spot prices remain elevated compared to future contracts, suggesting a potential price correction for toluene. India’s monthly toluene demand stands at approximately 57,000 metric tons (MT), with Reliance Industries Limited (RIL) and Bharat Petroleum Corporation Limited (BPCL) producing around 9,600 MT. Imports cover the remaining demand, totalling about 45,000 MT per month.
• In the petrochemical sector, toluene disproportionation (TDP) units continue to experience tight margins, with the naphtha-toluene price spread at $57/mt, short of the $95/mt breakeven. This pressure may prompt further corrections in naphtha pricing.

Chemicals Market News

• In the international market, upstream crude benchmarks showed an increase, with WTI up by 2.05% to $70.67/barrel, while natural gas prices declined by 0.48% to $2.69/MMBtu. FOB Singapore naphtha prices fell to $648/MT, and downstream FOB Korea toluene prices dropped by $5 to $705/MT.
• In plant news, Deepak Phenolics resumed operations at its Dahej facility on 27th October 2024, following a maintenance shutdown that began on 10th October. This facility has an annual production capacity of 300 kt for phenol and 180 kt for acetone.

Expert Insights

Experts forecast toluene prices to display mixed trends in the coming week amid bearish sentiment and excess inventory at ports. Buyers are encouraged to adopt a cautious approach to inventory management, as replacement costs remain low and feedstock prices are in backwardation. Just-in-time procurement strategies are recommended over bulk purchases to avoid holding high-cost inventories.