Lead: Currently, toluene inventories are accumulating at refineries in Shandong. Support comes only from the chemical and solvent sectors, with minimal consumption from the gasoline industry. Market pressure to offload toluene has increased, prompting refineries to actively lower their listed prices to reduce stocks. The weekly low point was 6,720 RMB/ton, a drop of nearly 1,000 RMB compared to last week.

1. Shandong Toluene Prices Continue to Decline

Amid fluctuating geopolitical tensions in the Middle East leading to volatile international crude oil prices, supply and demand fundamentals have had a limited impact on toluene prices, with market sentiment playing a dominant role in price movements. Shandong refineries experienced a divergence in sales performance this week. Higher-priced toluene moved smoothly due to procurement by the chemical industry, while lower-priced material faced sales resistance. Recently, only active buying from the chemical industry has provided relatively strong support for toluene prices, as demand from the oil products sector remains very limited.

Simultaneously, toluene units at some enterprises in the Panjin area have been shut down, and supply in the Beijing-Tianjin-Hebei region has not yet recovered. The arbitrage window for Shandong toluene to flow into surrounding regions remains open, with some volumes continuing to be exported, keeping the supply-demand balance for toluene in Shandong stable.

2. Toluene-Benzene Spread Widens

This week, the average price spread between benzene and toluene in Shandong was 1,178 RMB/ton, with the HDA (hydrodealkylation) process yielding a profit of 367 RMB/ton. Last week, the average benzene-toluene spread was 572 RMB/ton, resulting in an HDA processing loss of -184 RMB/ton. At the close on April 16th, the monitored profit for the HDA process reached 656 RMB/ton, marking the largest single-day profit value recorded this year.

Currently, with crude oil trading at high levels, aromatics production costs are well-supported, but downstream products are slow to follow suit. Furthermore, due to instability in crude oil supply for some production refineries, enterprises are prioritizing maintaining oil production. Additionally, as the profitability of toluene-to-benzene conversion has improved, another HDA enterprise in Shandong plans to commence feedstock intake in May, which will increase toluene consumption.

3. Xylene-Toluene Spread Widens but Remains Negative

This week, the average price spread between xylene and toluene in Shandong was -285 RMB/ton, with the average toluene refinery production-to-sales ratio at 120%. Last week, the average xylene-toluene spread was -242 RMB/ton, with an average toluene refinery production-to-sales ratio of 89%. News of PX (paraxylene) unit maintenance continued to influence the market this week, with some enterprises that had pending shutdowns confirming their maintenance schedules. Rising PX prices drove up MX (mixed xylene) prices. Concurrently, falling toluene prices narrowed the xylene-toluene spread, although it remained negative. This strong resistance prevents toluene from entering the gasoline pool, leading refineries to focus sales primarily towards the chemical sector.

Specifically, the xylene-toluene spread reached -600 RMB/ton last weekend. By Thursday, the spread had recovered to -150 RMB/ton.

4. Market Outlook

Positive Factors: Reforming units are experiencing significant losses, providing good cost support; enterprises that have reduced operating rates have no immediate plans to increase them in the short term; companies such as Panjin Haoye, Liaohua Petrochemical, Panjin Baolai, and Shenghong Refining have maintenance plans.

Negative Factors: Gasoline consumption remains very limited.

Recent demand from the chemical industry alone provides limited support for toluene prices in Shandong. Some enterprises are accumulating inventories, and significant uncertainty in the market outlook, coupled with broad declines in oil product and feedstock prices, is clearly weighing on the market. However, the toluene market currently lacks the conditions for a substantial downturn, as cost-side support persists, and lower prices continue to attract significant spot buying to cover short positions. Furthermore, expectations of increased HDA industry demand and potential export impacts suggest that the room for further decline in the toluene market is limited in the near term. The market is expected to stabilize.