Robust Demand Lifts Asia’s Toluene Prices to One-Month High

Asia’s toluene prices have climbed to a one-month high, settling at $683 per metric ton FOB Korea on Monday, a 2.2% increase, according to OPIS data. This marks the highest price point since June 24, driven by robust buying activity for September cargoes.

The uptick in demand has been fueled primarily by anticipation of increased gasoline consumption in China ahead of the October Golden Week holidays. Similarly, Singapore and South Korea are expected to see a rise in gasoline blending demand as Australia approaches its peak summer driving season, commencing in September.

Improved toluene disproportionation economics have also supported the price surge, with wider benzene-toluene price spreads making toluene uptake more attractive, an industry source said.

However, any upticks in toluene demand from the gasoline blending sector could be tempered by poor performance in the other underlying toluene derivative markets, the source added.

Demand for toluene diisocyanate, a chemical used in polyurethane foams and coatings, remains subdued amid uncertainty surrounding the U.S. tariff situation and ongoing seasonal lull in demand from the automotive and furniture segments.

Moreover, the start of the monsoon season in India, which typically lasts between June to September, and the onset of colder weather from October, which typically slows construction projects across Asia, are expected to further limit toluene demand growth.

Meanwhile, the completion of several annual plant turnarounds in the region and the addition of new toluene capacities in China could contribute to a supply glut from August.

Wanhua Chemical Group and Cnooc Ningbo Daxie Petrochemical have started up their new 70,000 mt/year plant in Yantai and 300,000 mt/year plant in Ningbo, respectively. Shandong Yulong Petrochemical is expected to start up its new 100,000 mt/year plant in Yantai in the third quarter, according to an industry source.

In contrast, only a handful of additional maintenance shutdowns have been planned for Q3, and these are unlikely to have an impact on the overall supply. These include Sinopec Zhenhai Refining & Chemical’s 160,000 mt/year plant in Ningbo, China; Hanwha TotalEnergies Petrochemical’s 580,000 mt/year plant in Seosan, South Korea; and ExxonMobil Asia Pacific’s 300,000 mt/year plant in Singapore.

Weaker gasoline blending demand and softer toluene prices in the U.S., coupled with higher tariffs for Asian toluene and elevated freight costs, have eliminated arbitrage opportunities from Asia to the U.S.

The September U.S.-Asia toluene price spread was below $200/mt on July 28, according to OPIS data. In addition, the two-month shipping time from Asia to the U.S. would mean cargoes will only arrive after the peak summer blending season concludes.

“The market is banking on an anticipated surge in gasoline blending demand in China and Australia to boost overall toluene demand this quarter,” a market source said.

While China’s October Golden Week holidays are expected to boost travel and gasoline demand, the country’s recent ban on internal combustion engine vehicles for ride-hailing services, effective July 20, could dampen a rise in overall gasoline consumption.

In contrast, a planned turnaround at Australia-based Viva Energy’s Geelong refinery, scheduled for August, is expected to support South Korea’s gasoline exports to the country, as indicated by Chemical Market Analytics by OPIS.

–Reporting by Serena Seng, sseng@opisnet.com; Editing by Mei-Hwen Wong, mwong@opisnet.com