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Insight | Time:Sep 13 2017 3:12PM
Will toluene market continue to climb?
 
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China's toluene market has been moving upward since August, spurred by plant shutdowns both in China and Northeast Asia coupled with uptick in oil price. Mainstream discussing price in East China hovers at around 5,360yuan/mt as of Sep 12, higher than the level in early Aug by more than 300yuan/mt, hence, participants has become more cautious. Then, will toluene market continue to climb and how much upward space is there for the market? Let’s take a look at whether supply-demand fundamentals are supportive or not.

1. Supply
Toluene inventory in East China ports stays at its high level for most of the year. In recent months, the reduction of inventory was very slow, compared with the same period of last year when inventory decreased continuously to the bottom in end-Sep.



In terms of plant operation, production loss due to shutdowns will be offset by plant restarts and capacity expansion. Dalian West Pacific Petrochemical has maintenance plan from mid-Sep, but it will only last 1 week. On the other hand, Binzhou Youtai and Shijiazhuang Refining are going to restart their plants in Sep, and Sinopec Jinling plans to expand toluene capacity by 200kt/yr in Q3. In Northeast Asia, most aromatics plants are running stably without scheduled maintenance ahead, except for KPIC’s and GS Caltex’ plants which were closed due to technical problem and fire accident respectively.

Plant turnaround in China and Northeast Asia
Company Location Capacity (kt/yr) Status
Binzhou Youtai Shandong 40 Closed on Jul 3, to restart in Sep
Sinopec Jinling Jiangsu 554, 200 200kta to be added in Q3
Sinopec Shijiazhuang Refining Hebei 27 Closed on Jul 1, to restart in Sep
CNOOC Huayue Shandong 54 Restart failed in H2 Aug, to stay closed for another 3 months
Dalian West Pacific Liaoning 374 To close in mid-Sep for 1 week
Sinochem Quanzhou Fujian 300 To close in Nov for 45 days
CPC Corp Kaohsiung, Taiwan 130 To close in mid-Oct for 30 days
KPIC Ulsan, South Korea 100 Closed on Sep 5 due to technical problem, restart undecided
GS Caltex Yeosu, South Korea 170 Closed on Aug 2 due to fire accident, restart undecided

2. Demand
Toluene’s downstream fine chemical industry is doing well recently. Besides from the eye-catching profits in TDI production, margins of benzoic acid and benzyl chloride are also healthy. Most downstream plants can maintain high rate operations, with the exception of some plants closed for upgrade or maintenance.



In refined oil products blending, the requirements for products of high quality has grown stronger. Therefore, some refineries reduces toluene production for sale, and use it internally as gasoline or diesel additive. However, toluene is not attractive to blenders and their requirement for toluene does not increase much, as mixed aromatics is more competitive in pricing.



In a conclusion, refineries are more active in fuel blending, and thus toluene supply to the market decreases. However, high port inventory reflects great oversupply, and it is unlikely to be absorbed in short term as blenders prefer to buy other blendstock. The consumption of toluene in downstream derivative plants is not large enough in spite of high operating rates. In the lack of upward momentum, toluene market is may reach a plateau.
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