Sinopec Cuts Toluene List Price as Demand Slows
Sinopec lowered its domestic east China toluene list price by 100 yuan per metric ton ($14.44/mt) to 5,500 yuan/mt ex-warehouse on Feb. 5, the company’s first downward price adjustment after a series of hikes in January, market sources said on Tuesday.
The current list price is equivalent to $676.93/mt CFR China on an import parity basis. Sinopec last revised its east China toluene list price on Jan. 29, raising 200 yuan/mt to 5,600 yuan/mt ex-warehouse, OPIS data shows.
Domestic market activity is tapering off as the Spring Festival approaches. Downstream derivative sectors have started to reduce their operating rates in preparation for the nationwide holiday migration as workers return to their hometowns to celebrate the festivities with their families.
According to industry sources, the average operating rate for downstream toluene diisocyanate plants currently stands at 70%. This is expected to decline further during the last week before the Spring Festival, creating a ripple effect that will likely further dampen toluene demand.
Toluene demand rose in January as market participants rushed to stockpile inventory, driving local prices higher amid a period of constricted supply. However, this bullish momentum has since dissipated, with most buyers having fulfilled their requirements, effectively concluding the procurement cycle. The market then entered a quietened phase at the start of February, characterized by waning liquidity and shifting sentiment.
On Monday, OPIS assessed prompt toluene prices in east China at 5,425 yuan/mt ex-tank, marking a 0.3% week-on-week decline. This marginal retreat suggests the onset of the pre-holiday lull, as the market transitions from a demand-driven environment to one dominated by ample supply.
Following the restart of Sinochem Quanzhou Petrochemical Co.’s 1.053 million mt/year toluene plants in Fujian in early February after a maintenance shutdown in November, supply has been steadily increasing in the local market. Furthermore, with no planned maintenance shutdown or unplanned turnarounds in February, the supply of toluene is expected to remain ample.
Looking ahead, the post-holiday outlook remains a point of contention among market participants, leaving sentiment mixed. While immediate downstream demand is soft, a segment of the market remains optimistic that the current favorable benzene-toluene price spreads will support demand for toluene and incentivize producers to maintain higher operating rates at toluene disproportionation or TDP units.
According to OPIS data, the east China benzene-toluene spread was assessed at 615 yuan/mt ex-tank on Feb. 9—a sharp 16% increase week on week. Should these margins persist, the resulting steady consumption from the TDP sector could effectively offset the seasonal lull in other derivative industries, providing much-needed support as the Chinese market restarts following the Spring Festival.
Conversely, a more cautious segment of the market anticipates ample supply to continue exerting downward pressure on toluene prices. This bearish outlook is compounded by a slowdown in gasoline blending activities, leaving the TDP sector as the primary remaining outlet for toluene demand.
Furthermore, local supply is mounting; shore-tank inventories in East China rose by 25.8% week on week to reach 42,400 mt, according to Chemical Market Analytics by OPIS. This significant inventory build-up suggests that unless downstream demand recovers rapidly after the holidays, the domestic market may face a prolonged supply overhang.
—Reporting by Serena Seng, sseng@opisnet.com; Editing by Mei-Hwen Wong, mwong@opisnet.com