Toluene Prices Ease Amid Upstream Corrections; Demand Revival Expected in December

Key Highlights

• Price Dynamics: Toluene prices dropped by ₹1/kg due to lower crude oil and feedstock costs, with import rates ranging between ₹69.50 and ₹70/kg for advance payments.
• Demand Trends: Demand recovery is expected in December, driven by seasonal coatings activity and rising pharmaceutical production for bulk drugs like Sartans and Ciprofloxacin.
• Global Feedstock Impact: Mixed trends in feedstock prices saw naphtha prices drop to $623/MT (FOB Singapore) and Toluene prices rise to $722/MT (FOB Korea), enhancing the Toluene-to-Benzene margin to $158.
• Production Updates: Maintenance shutdowns by Formosa Chemicals & Fibre Corp in China have impacted supply, likely influencing Toluene’s short-term price trajectory.

Toluene Prices Drop Amid Feedstock Decline

• Toluene prices have seen a reduction of ₹1/kg, as importers now offer the material at ₹69.50++ per kg ex-Kandla and ₹70++ per kg ex-Mumbai for advance payment terms.
• Meanwhile, traders are quoting slightly higher rates of ₹71++ per kg ex-Kandla and ₹71.50++ per kg ex-Mumbai for transactions on 30-day credit terms.
• This price correction is largely attributed to a significant decline in upstream crude oil prices and feedstock naphtha costs, which have exerted downward pressure on domestic Toluene prices.

Demand Surge Expected from Pharma and Coatings

• The supply situation remains relatively balanced, though slightly constrained by lower liquidation levels observed in November. However, demand is anticipated to recover in December 2024, driven by seasonal factors and heightened requirements from packaging and paint manufacturers.
• Additionally, rising consumption from the bulk drug manufacturing segment is expected to bolster demand. Key pharmaceutical ingredients, including Sartans (Losartan, Valsartan, Telmisartan), Dichlorophenylacetone, Diclofenac, and Ciprofloxacin, are likely to witness increased production levels in the coming weeks.
• From a BTX perspective, the naphtha-to-Toluene spread has improved from $87 to $99, although it remains below the breakeven threshold of $150. On the other hand, the Toluene-to-Benzene spread is highly favourable at $158, well above the breakeven point of $90.
• India’s monthly Toluene demand is estimated at 57 kt, with domestic producers such as Reliance Industries Ltd. (RIL) and Bharat Petroleum Corporation Ltd. (BPCL) collectively supplying approximately 9.6 kt per month. The balance, approximately 45 kt, is met through imports.

Global Feedstock Trends Shape Price Spreads

• In global markets, the upstream WTI crude oil benchmark saw a marginal increase of 0.22%, closing at $70.12 per barrel. Conversely, natural gas prices witnessed a significant drop of 5.10%, settling at $3.16/MMBtu.
• FOB Singapore Naphtha prices declined by $3 over the last three days to $623/MT.
• FOB Korea Toluene prices rose by $10, reaching $722/MT.
• FOB Benzene prices, however, fell by $20 to $880/MT.
• Formosa Chemicals & Fibre Corp (FCFC), a major producer of Para-Xylene and Ortho-Xylene in Huizhou, China, commenced its annual maintenance shutdown in early October 2024.
• The turnaround, expected to last until mid-November 2024, has impacted a plant with a production capacity of 870 kt per annum.

Expert Opinion: Supply Adjustments from Key Producers

It is anticipated a bullish trend in Toluene prices over the coming weeks, supported by positive market sentiment and increased demand from the pharmaceutical industry. Seasonal activity in the paints and coatings sector is also expected to contribute to price stability in the short term.