Toluene Prices Fall Amid Lower Feedstock Costs; Pharma and Paint Sectors Aid Stability

Key Highlights:

• Price Trends: Toluene prices dropped by ₹5/kg on a weekly basis, now at ₹70++ per kg ex-Kandla and ₹71++ per kg ex-Mumbai.
• Supply Abundance: Ample inventories at Indian ports due to slow demand during festive months.
• Demand Recovery Expected: Pharmaceutical and paints industries to drive near-term demand recovery.
• Mixed Market Outlook: Weak trading sentiment persists, but demand recovery may stabilize prices.

Chemicals Price: Decline in Toluene Prices Amid Weak Upstream Dynamics

• Importers have lowered Toluene prices by ₹2/kg, with current offers at ₹70++ per kg on an ex-Kandla basis and ₹71++ per kg on an ex-Mumbai basis for 60-day credit terms. Traders are quoting slightly lower rates of ₹70++ per kg ex-Kandla and ₹71++ per kg ex-Mumbai for advance payment terms.
• Feedstock naphtha prices have dropped sharply by nearly $40 compared to last week, leading to a significant decline in the Asian benchmark FOB Korea Toluene prices, which fell by around $20/MT.
• This week saw limited bulk transactions as major buyers remained cautious due to weak upstream dynamics, especially in the crude oil and naphtha markets. On a weekly basis, Toluene prices fell by ₹5/kg, mainly due to bearish market sentiment and lower replacement costs.

Chemicals Demand and Supply: Demand from Pharmaceuticals and Paints Sectors Set to Rebound

• Market sentiment for Toluene has softened, influenced by the drop in upstream crude oil benchmarks and naphtha prices. With a decrease in formula pricing, replacement costs are anticipated to stay low.
• Supply levels at key Indian ports are currently abundant. This surplus is largely attributed to slow inventory liquidation during October 2024, following a decline in downstream production during the Navaratri and Diwali holidays. However, demand is expected to recover in November, particularly from the bulk drug manufacturing sector. The production of essential pharmaceutical ingredients like Sartans (Losartan, Valsartan, Telmisartan), Dichlorophenylacetone, Diclofenac, and Ciprofloxacin is projected to rise.
• Additionally, the resumption of the paints and coatings season is likely to offer long-term support to Toluene demand.
• The BTX cracker dynamics present a mixed outlook. The Naphtha-to-Toluene price spread is currently narrow at $37, well below the breakeven level of $150, while the Toluene-to-Benzene price spread remains favorable at $195, above the breakeven point of $90. Given these factors, a potential recovery in Toluene prices is possible, but it would require robust demand, as highlighted by an industry expert.
• India's monthly Toluene demand is approximately 57 kt, with domestic producers such as Reliance Industries Ltd (RIL) and Bharat Petroleum Corporation Ltd (BPCL) contributing around 9.6 kt per month. The remaining demand, approximately 45 kt, is fulfilled through imports.

Global Chemical Market News and Its Impact on Toluene Prices

• In the global market, the upstream crude oil benchmark WTI saw a 0.69% increase, closing at $67.48 per barrel, while natural gas prices rose by 2.89% to $2.89/MMBtu.
• Feedstock FOB Singapore naphtha prices have declined by $10 over the past three days, now standing at $625/MT.
• Meanwhile, FOB Korea Toluene prices have dropped by $25 to $665/MT, and FOB Benzene prices have decreased by $5 to $860/MT.
• Formosa Chemicals & Fibre Corp (FCFC), a major producer of Para-Xylene and Ortho-Xylene in Huizhou, China, initiated a plant shutdown in the first half of October 2024 for its annual maintenance.
• The turnaround is expected to continue until mid-November 2024. The plant has a production capacity of 870 kt per annum.

Expert Opinion: Stability Ahead with Mixed Trends

Mixed trend is anticipated in Toluene prices in the coming week due to the prevailing weak trading sentiment. However, expected demand from the pharmaceutical industry and the seasonal rise in activity from the paints and coatings sector are likely to provide some stability to Toluene prices in the short term.