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Asian toluene markets are feeling the weight of rising stock levels in eastern China and India, raising concerns of a negative outlook for early Q3, S&P Global Platts data showed.

In east China, inventory levels were estimated to be about 100,100 mt as of late Monday, up from between 80,000 mt and 90,000 mt last week.

A year ago, for the week ended July 3, 2015, the inventory stood at 80,000 mt and had hit a 2016 high of 140,000 mt for the week ended May 6, Platts data showed.

The surge was attributed to a large volume of cargoes arriving in east China over the weekend, estimated to be more than 30,000 mt.

Although an estimated 17,300 mt was consumed by end-users, consumption was lower than the overall shipments that arrived.

The FOB Korea weekly average price was $570.30/mt as of July 1, 2016, down 24% when compared with $749.40/mt FOB Korea on July 3, 2015.

One of the factors cited for the increase was weak demand from the gasoline sector, where toluene is also used as a blendstock.

Domestic consumption has fallen as new production capacity has come online and several plants have resumed operations after completing planned maintenance.

For example, CNOOC Ningbo Daxie Petrochemical brought on stream a new 280,000 mt/year toluene plant in early June, which together with its older plant at the same site has raised its total toluene production capacity to 420,000 mt/year.

Dalian Xitai Petrochemical restarted its 400,000 mt/year toluene plant in May, after it was shut in April for a month of maintenance.

Similarly, thin demand in India has also resulted in a rise in domestic inventories.

An end-user in India said current inventories stood at about 55,000 mt, citing "backlog and contractual vessel arrivals," adding that the overall volume represents about two months' worth of inventory.

More deepsea cargoes are expected to arrive in India, which resulted in buyers staying out of the spot market due to uncertainty as the glut could lead to sellers lowering their offers in order to reduce stock levels.

On July 1, 2016, the CFR India marker for toluene stood at $643.50/mt, down from $779/mt CFR India on July 3, 2015.

Amid the oversupply situation, "South Korean supply is expected to remain stable in the second half of the year, as producers who had shut for maintenance in the first half of the year have restarted their plants," Platts said in an H2 2016 outlook published this week.