Excerpt:
Fluctuating US-Iran negotiations pushed international oil prices up significantly. Additionally, increased demand from exports and disproportionation led to sustained premium bidding for toluene from refineries in the Shandong region.

1. Shandong Toluene Prices Stabilize and Rise

The divergence in US-Iran negotiations kept international oil prices stable above $100 per barrel, with prices trending upward. Meanwhile, toluene refineries in Shandong saw smooth sales, with listed auction prices consistently at a premium, driving the market negotiation center higher. The main supportive factors, aside from cost-side momentum, included improved downstream phased demand. Unplanned purchases by disproportionation plants, a significantly opened export window prompting traders to replenish and lock in volumes, and strong procurement of start-up materials by benzene production plants all contributed to the bullish sentiment.

2. Toluene and Pure Benzene Price Spread Continues

This week, the average price spread between pure benzene and toluene in Shandong was 1,636 yuan/ton, with the HDA process processing profit at 866 yuan/ton. Last week, the average spread was 1,777 yuan/ton, with HDA processing profit at 970 yuan/ton. Since the beginning of May, the gross profit margin for HDA companies in Shandong has fallen below 1,000 yuan/ton. While a disproportionation plant did make purchases this week, the action was not sustained, having only a temporary impact on the toluene market price.

The feedstock introduction timeline for Shandong Ruilin Chemical's HDA plant has been delayed. If export gap-filling does not persist, toluene refineries may still face certain sales pressure.

3. Price Spread Exists Between Xylene and Toluene but Provides Limited Downstream Stimulus

This week, the average price spread between xylene and toluene in Shandong was 137 yuan/ton, with the average production-to-sales ratio for toluene refineries at 120%. Last week, the average spread was 116 yuan/ton, and the average production-to-sales ratio was 83%. Gasoline companies are burdened with high inventories, and end-user demand is weak. The rise in toluene prices has further hindered procurement activity by the gasoline industry.

4. Outlook

Positive factors: Severe losses in reforming units; good cost-side support; the export window opening; and planned commissioning of downstream benzene production plants.

Negative factors: Very limited gasoline consumption; weak purchasing enthusiasm from the fine chemical industry.

Currently, the main positive support for the Shandong toluene market comes from short-covering for export deals, rigid procurement by the downstream HDA industry, and planned commissioning of new plants. Other supportive factors in the market are weaker than the refineries' willingness to sell proactively. Smooth refinery sales within the week and low inventory levels provide some price support. However, with short-covering still present in the market, the toluene market lacks momentum for further gains in the short term and is expected to stabilize.