Toluene Prices Under Pressure Despite Strong Bulk Drug Demand

Price

• Toluene prices in the domestic market witnessed a decline of Rs.2/kg today, bringing the rates to Rs.81/kg ++ Ex-Mumbai basis and Rs.80/kg ++ on an Ex-Kandla basis, with 60-day payment terms. The Asian benchmark FOB Korea toluene prices are also experiencing a correction due to poor market sentiment.
• Traders offered lower prices, quoting Rs.78.50/kg ++ Ex-Mumbai and Rs.78/kg ++ Ex-Kandla for immediate dispatches on advance payment terms. However, consumers are refraining from finalizing any bulk deals due to expected further price corrections.
• The decrease in toluene prices is mainly driven by weak market sentiment and the bearish trends observed in crude oil and naphtha prices.

Demand and Supply

• In July, toluene prices displayed mixed trends, impacted by sluggish downstream demand despite strong demand from the bulk drug sector.
• The demand from the packaging industry is gradually declining as many ink and packaging manufacturers are shifting to n-propyl acetate instead of toluene, following a ban on its use in food packaging production.
• Both traders and end-users are cautious about building inventories due to price volatility and high liquidation pressure. Despite this, incoming vessel supplies remain steady and robust, which may lead to further inventory accumulation.
• India’s monthly demand for toluene is estimated at approximately 57,000 MT. Domestic producers, including RIL and BPCL, contribute around 9,600 MT per month, while an average of 45,000 MT is imported monthly.
• In terms of cracking dynamics, the naphtha-to-toluene price spread is currently at $145, which is below the $150 breakeven spread. On the other hand, the toluene-to-benzene price spread is around $180, significantly above the $95 breakeven spread, indicating positive returns for TDP crackers. Therefore, refineries can sustain a further price correction of up to $50 in toluene.

News

• In the international market, upstream crude oil benchmark WTI prices rose by 1.20%, reaching $73.88 per barrel.
• Naphtha prices stood at $665/MT. Meanwhile, FOB Korea benzene prices dropped by $10 to $990/MT
• FOB toluene prices decreased by $10/MT to $810/MT.

Experts's Opinion

• It is anticipated that toluene prices will remain bearish this week due to ongoing weak market sentiment. However, the strong demand from the bulk drug sector is expected to provide some support to toluene prices.
• With replacement costs currently lower, it is advisable for buyers to adopt just-in-time procurement strategies rather than accumulating inventories.