September 29 report:
According to the commodity market analysis system, in September, the Chinese toluene market rose in the first half of the month and entered a range-bound consolidation in the second half. At the beginning of the month, on September 1, the average market price was 7,440 CNY/ton, and by the end of the month, on September 29, the average price had risen to 8,550 CNY/ton, representing a cumulative increase of 14.92% for the entire month. In the first ten days, the market rapidly surged due to geopolitical disturbances and tight supply. After peaking mid-month, prices fell slightly as crude oil prices retreated. In the last ten days, low inventories at ports and refineries provided support, leading to a seesawing trend within a high range. Overall, the market's center of gravity was significantly higher compared to the end of August.
Cost Side:
International oil prices remain the central driver of this month’s market dynamics. In the first half of the month, concerns over tightening crude‑oil supply kept prices firm, with naphtha and aromatics following suit; robust cost support for toluene pushed spot prices higher. In the middle and latter part of the month, as expectations grew that Saudi supplies would gradually resume, the upward momentum in crude oil weakened, leading to volatile, softer futures and a loosening of cost‑based support, which in turn prompted pullbacks in both the toluene futures and spot markets. Toward the end of the month, recurring geopolitical tensions, coupled with another overnight rally in crude oil, rekindled volatility in cost expectations—adding a key external factor to the range‑bound trading seen in the second half of the month. As of mid‑month, the WTI November contract settled above $96 per barrel, while the Brent November contract held just above $103 per barrel, with the overall price center of gravity remaining elevated. As of September 28, the U.S. WTI November futures settled at $92.60 per barrel, and the Brent December futures settled at $97.83 per barrel.
Supply side:
The tight supply in the first half of the month and the marginal easing in the second half, but with still low inventory, were key to maintaining high prices this month. In early September, some refinery units were scheduled for maintenance, leading to a contraction in the supply of toluene in China. Port inventory fell to a low level, with Jiangsu port inventory dropping to around 10,000 tons, and there was almost no additional import cargo to supplement the supply. Petrochemical companies had a strong desire to maintain high prices, which pushed prices up. In the middle and late part of the month, as maintenance units gradually resumed operations and imports increased, the tight supply situation eased somewhat compared to early in the month. Petrochemical ex-factory quotes softened, and more goods were sold in the circulation market, suppressing further price increases. However, by the end of the month, port and refinery inventories remained at low levels, and there was no significant oversupply. The increase in supply had a limited impact on price suppression.
Demand Side:
According to the commodity market analysis system, this month's PX trend was significantly stronger than that of toluene, driving the sentiment of the sector. Sinopec raised its September PX list price by 600 CNY/ton to 9,600 CNY/ton. The Asian PX external market also strengthened, ending the month at around $1,250/ton FOB Korea. Both PX and toluene are in the downstream aromatic chain of naphtha. The strength of PX not only elevated the cost and valuation center of the entire aromatic sector but also led refineries to favor producing more PX and less toluene in their disproportionation and isomerization output structure, indirectly tightening the supply of toluene in the Chinese market, which corresponds with the low port inventories. However, it should be noted that the strength of PX was mainly supported by its own plant maintenance and the rigid demand for PTA, and the transmission to the end consumption of toluene was not smooth, as there was no significant inventory replenishment in the downstream of toluene.
The overall performance of the downstream sector has been lukewarm, lacking proactive buying. The operation of paint, solvent, and chemical supporting facilities has been stable, but there has been no new increase in procurement. The market is mainly driven by rigid demand for replenishment. During the early part of the month when prices were rising, downstream buyers mostly followed the market trend and purchased according to their needs. After the market turned downward in the middle of the month, downstream buyers adopted a mentality of buying on the rise and not on the fall, slowing down the pace of restocking, and the trading within the market became quieter. In the latter part of the month, the TDI industry chain maintained firm quotes with tight supply, providing some support for toluene demand. However, the follow-up in the terminal sectors such as coatings and adhesives was limited, and no concentrated buying surge was formed. As the end of the month and the long holiday approached, market trading further weakened, and buyers became more cautious. The demand side failed to provide a directional bottom.
Market Outlook:
In the short term, geopolitical disruptions on the cost side have yet to fully abate, but expectations for a recovery in crude oil supply remain, leading to high‑level price volatility and diminishing momentum for further sharp gains. With Chinese toluene units resuming operations after maintenance, supply continues to rebound, and low port inventories still provide some support; however, upside potential is constrained by relatively weak demand. PX’s strong performance continues to underpin valuations across the aromatics sector, though it remains necessary to monitor the risk of a pullback from current highs and its potential downward drag on toluene. Amid steep backwardation in overseas markets, the pace of import replenishment remains sluggish, making it difficult for China’s port inventories to build up quickly in the near term. Downstream sectors such as coatings and solvents show no clear signs of a near‑term recovery, with cautious pre‑holiday stocking and post‑holiday restocking patterns still to be seen. Overall, the toluene market is likely to trade within a high‑range fluctuation in October, with crude oil price swings, PX‑related linkages, and changes in port inventories remaining the key drivers. Investors should proceed with caution when chasing higher prices, while keeping an eye on refinery cost levels and the strength of low‑inventory support.
