Preface: The spot toluene market is seeing tightening circulation, with holders holding firm in price negotiations. Toluene prices have fallen less than crude oil and show a pattern of being prone to gains rather than declines.
1. Toluene price fluctuations moderate
During the review period, the Shandong-to-Jiangsu arbitrage window reopened, with a small volume of truckload spot cargo circulating for arbitrage. The main reason is that toluene consumption in the Shandong market is concentrated in the toluene-to-benzene and TDI sectors, while demand from the chlorination and oxidation industries has remained persistently low, with limited impact on toluene price movements. Guangdong has become the primary export hub for domestic toluene in recent months, and with frequent trader activity, spot toluene supply is tight, resulting in a firmer price trend during the week.
On the plant side, the No. 2 extraction unit at Zhongke Refining & Chemical is operating normally, adding 20,000 tons/month of toluene supply, with no internal consumption plans for now. The aromatics extraction unit supporting the cracking plant at Tarim Petrochemical adds 3,500 tons/month of toluene, mainly for inter-plant supply. The aromatics extraction unit at Lianyungang Petrochemical's cracking plant adds 2,500 tons/month of toluene, with plans for external sales.
2. Cost pressure persists in fine chemical sectors
In the TDI sector, the operating rate stands at 80%, with unit loads being raised in Fujian and Xinjiang. Among toluene's downstream sectors, TDI product margins remain the highest. Both the benzoic acid and benzyl chloride sectors face oversupply, with producers maintaining a sales model of output cuts and firm pricing; however, weak end-user demand has forced the sectors to operate at low loads.
Additionally, the spread between pure benzene and toluene narrowed during the week, pushing processing margins down to near breakeven levels and slowing downstream procurement momentum.
3. Market outlook
In the near term, international oil price fluctuations remain the dominant factor driving toluene prices. However, domestic spot toluene supply is unlikely to ramp up quickly, and export orders are still being delivered. The toluene market's fundamentals remain stable, and with holders showing strong price-supportive sentiment, toluene prices are expected to maintain a firm oscillation pattern.
In the medium to long term, market rumors suggest the upcoming relaxation of refined oil product export restrictions would be bullish for the domestic gasoline and feedstock markets. However, the volume of toluene flowing into the gasoline pool through commercial channels is very limited, and the bullish impact on the product is mostly reflected in trading sentiment. On the demand side, downstream toluene-to-benzene and TDI plants have maintenance plans in the pipeline, which will reduce toluene consumption. On the supply side, units at Zhejiang Petrochemical, Shenghong Refining, Hengli Petrochemical, Jincheng Petrochemical, and Shandong Fuhai are returning from maintenance; while some of these companies do not directly sell toluene, the incremental supply of related products exerts indirect bearish pressure on toluene. In terms of sentiment, the repeated geopolitical games between the U.S. and Iran have caused wide fluctuations in international oil prices, which directly dominate toluene price movements. Overall, bearish factors are gaining weight, and the previously firm toluene market pattern is gradually weakening.
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