Executive Summary: In September, the price spreads between toluene and pure benzene, as well as toluene and xylene, gradually recovered. This improvement boosted profitability for the hydrodealkylation (HDA) disproportionation process, thereby stimulating chemical sector demand. Conversely, the gasoline sector contracted due to weakening oil prices, prompting enterprises to shift their sales focus toward chemical applications and export channels. With the Mid-Autumn Festival and National Day holidays approaching, the market is entering a complex phase of interplay among costs, supply-demand fundamentals, and pre-holiday stockpiling.
Despite multiple attempts to ease tensions in the Middle East and the restoration of Saudi pipelines, which alleviated market concerns and caused international oil prices to drop sharply due to the erosion of geopolitical risk premiums, toluene prices exhibited relative resilience. Although cost-driven declines led to a synchronized pullback in toluene prices, underlying supply-demand support remained intact, resulting in lower volatility compared to crude oil.
In September, the average price spread between pure benzene and toluene in the Shandong region stood at 1,091 RMB/ton, yielding an HDA processing profit of 315 RMB/ton. From mid-September to the present, this average spread widened to 1,204 RMB/ton, with HDA processing profits rising to 408 RMB/ton. On September 11, however, a sharp decline in international oil prices—driven by diplomatic efforts to de-escalate Middle Eastern tensions and a subsequent drop in market sentiment premiums—caused commodity prices to fall significantly. During this period, the pure benzene-toluene spread briefly dipped below 1,000 RMB/ton.
Overall, the pure benzene-toluene spread recovered well throughout September. Additionally, the widening spread between xylene and toluene has attracted purchasing interest from disproportionation plants.
By mid-month, the average price spread between xylene and toluene was 374 RMB/ton. While this level historically made blending toluene into gasoline pools economically viable, recent declines in international crude oil prices have significantly impacted gasoline pricing. Consequently, the volume of toluene directed into gasoline blending pools has decreased substantially. Enterprises are primarily focusing on clearing inventory through pre-sales to the chemical industry and export markets.
As the Mid-Autumn Festival and National Day holidays approach, the toluene market is entering a critical phase characterized by the interplay of cost dynamics, spot supply-demand conditions, and pre-holiday stockpiling activities.
Cost Perspective: Although tensions in the Middle East have eased, geopolitical factors continue to drive significant volatility in oil prices. Given that supply disruptions are unlikely to be resolved in the short term, international oil prices are expected to remain relatively high.
Supply Side: News regarding domestic refinery load reductions due to crude oil supply shortages continues to cast a shadow over the market. While these issues have not directly impacted the toluene market immediately, they contribute to an overall tightening of supply. Furthermore, rising prices for related gasoline and aromatic products are fueling bullish sentiment, encouraging toluene prices to follow suit.
Downstream Demand: Facing pre-holiday stockpiling needs, downstream buyers exhibit moderate purchasing enthusiasm. However, against the backdrop of tight supply, these stockpiling activities continue to push prices steadily higher.
Conclusion: The toluene market is expected to maintain a strong performance leading up to the National Day holiday.
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