Toluene values keep falling as Indian demand slumps

Asian toluene prices have fallen to a new record low on the back of bearish global oil markets and rapidly reduced Indian demand.

Argus assessed toluene at $290-300/t fob South Korea yesterday, the lowest level since May 2003.

The Indian government imposed a 21-day nationwide lockdown from 25 March to curb the coronavirus pandemic. This has resulted in restrictions on land transportation and manufacturing operations where only essential businesses can operate. This has hit demand for toluene in Indian domestic and import markets, with toluene used as a solvent in the paint, ink, plastic, cosmetic and pharmaceutical industries.

Domestic trade has ground to a halt since the start of the lockdown as reduced transportation limits spot liquidity. Argus yesterday assessed prices of toluene in the west Indian ports of Mumbai and Kandla at 40-40.50 rupees/kg ex-tank.

While there is still demand for toluene in the pharmaceutical and food packaging industries, it remains a challenge for toluene to be transported to factories.

Market participants are also struggling to arrange inventory space for imminent import arrivals, delay shipments in April and even explore the possibility to re-export toluene to other Asian markets.

Even though port operators were able to retrieve imports, outward transportation of toluene has been difficult. Ullage constraints at onshore storage tanks is likely to limit toluene import discussions in the short term.

Indian distributors are unsure how long they must hold on to toluene stocks because of the disrupted logistics and restricted manufacturing activity. It is uncertain if the lockdown will be extended after 14 April, although its lifting may come with similar restrictions if the outbreak continues to spread.

Fellow producers in Thailand and Singapore have begun searching for new outlets for toluene supplies in April, mainly Chinese and southeast Asian markets, because of reduced demand and the uncertain situation in India.

Spot prices of toluene were at $390-400/t cfr southeast Asia on 27 March, according to Argus data.

A series of continuing and planned plant turnarounds across Asia-Pacific in April will have minimal impact as reduced demand from net importers exceed supply cuts in an earlier oversupplied market.

India imported 437,241t of toluene in 2019, or an average of 36,437 t/month. Thailand was the main exporter to India last year with an import share of 29pc.

By Yee Ying Ang