South China Toluene May Fall Amid Wide Gap Over East Market Prices

South China toluene prices may fall in December on softer demand, and as their spread over east market prices has widened to Chinese yuan (CNY) 400/tonne ($61/tonne).

The current spread based on assessed prices on 29 November is double the usual gap of CNY200/tonne, which takes into account the shipping cost from east to south China.

At the close of trade on Wednesday, spot toluene prices in south China were at CNY5,940/tonne, while east China prices stood at CNY5,540/tonne, according to ICIS data.

Prices in both markets had surged at the start of November, tracking gains in international crude prices, but eventually moved in different directions, resulting in a 60% increase in the spread from fCN250/tonne on 6 November, the data showed.

The current spread is the highest recorded since July, and will likely exert pressure on south China prices in the coming weeks since demand in the region has weakened, while supply recently increased.

At the downstream coating sector, producers are expected to reduce output during the winter season, weighing on demand for toluene, market sources said.

Meanwhile, Sinopec Hainan Refining & Chemical – a major buyer in south China – will not be buying spot toluene cargoes as its benzene and paraxylene (PX) production was taken off line for maintenance on 18 November and will only restart in January next year.

Meanwhile, south China can expect fresh toluene supply in December following the recent start-up of CNOOC Huizhou Refining and Chemical’s phase II aromatics facility in Guangdong province. The facility has a 340,000 tonne/year toluene capacity.