Review of toluene market in 2023
In 2023, the toluene market fluctuated upwards. According to the bulk list data from Business Society, the benchmark price of toluene in the market was 6570 yuan/ton on December 31, an increase of 10.98% from 5920 yuan/ton at the beginning of the year. The highest point for the year appeared in September at 8400 yuan/ton.
The international crude oil range fluctuated from January to April, with some support for the cost of toluene; After the outbreak of the epidemic in the first half of the year, it was fully relaxed, and gasoline consumption was rapidly released. Downstream mixed blending demand and disproportionation operating load increased, supporting the demand for toluene. In addition, arbitrage activities between Asia and the United States led to an increase in external prices, which also drove up the price of toluene; Taking into account the above factors, the toluene market has seen a significant increase from January to April.
The continued interest rate hikes by the Federal Reserve and the European Central Bank in mid to late April have had negative feedback on the economy, with a bleak outlook for global demand and an increased risk of economic recession. The price of crude oil has dropped significantly, and the cost of toluene has declined. As the price of toluene rises, there is resistance from downstream towards high priced goods, and the demand side is gradually weakening. The price of toluene wants to slightly decline.
Starting from mid to late May, due to centralized maintenance of multiple devices, the supply of toluene is tight, but the demand side is still weak, resulting in a narrow range of fluctuations in the toluene market as a whole.
On the one hand, the consumption tax on various products such as mixed aromatic hydrocarbons was levied in the third quarter, which played a certain boosting role in the toluene market. In addition, North American mixed blending remained strong for a long time, and toluene exports were active. In the context of OPEC+continuing to reduce production, coupled with the United States entering summer, the driving season is the peak season for refined oil consumption. With the support of tight supply and strong demand in the market, oil prices continue to rise, and the cost of the toluene market has significantly increased, The toluene market has risen again.
In the fourth quarter, on the one hand, domestic gasoline consumption has entered the off-season, and the demand for blending has also decreased, resulting in weak overall demand for toluene. On the other hand, the high level of the international crude oil market has significantly declined, and the cost center of toluene has significantly shifted, causing the price of toluene to continue to decline.
Outlook on toluene market in 2024
Cost side: International crude oil price center expects a slight increase in toluene cost side, supported by expectations
The external environment in which crude oil operates in 2024 is still quite complex, with a complex geopolitical situation and constant conflicts. This will have an unpredictable direct impact on oil prices, resulting in even more drastic fluctuations. In the long run, the supply-demand game remains dominant, and on the supply side, OPEC’s production control will continue to play a role in managing oil price expectations. The demand side faces more uncertainty, and an economic slowdown is likely to create a constraint on oil prices. According to the EIA report in December, the EIA lowered its forecast for Brent crude oil prices in 2024 to $83 per barrel, a decrease of $10 per barrel compared to the November forecast. Overall, due to the large number of oil price variables in 2023, oil prices have been operating at low levels for a long time, and the base oil price is not high. It is expected that the average oil price in 2024 may still be slightly higher than in 2023, but due to demand constraints, oil prices will not increase significantly.
Supply side: It is expected that the supply side of toluene will continue to increase in 2024
In 2023, the domestic supply capacity of toluene has increased, with a total of approximately 2.49 million tons of new production capacity, reaching 18.63 million tons per year, a year-on-year increase of 9.91%. Due to the addition of new facilities for toluene production in China in 2024, as well as the development direction of reducing oil and increasing chemical production, as well as the impact of years of strict consumer tax policies, the willingness of main and local refining companies to export toluene has increased. Therefore, in 2024, production enterprises will pay more attention to the toluene commodity market and increase their enthusiasm for export. Therefore, it is expected that the domestic supply of toluene will continue to rise.
Demand side: Slow growth rate of toluene market demand in 2024
Toluene is one of the main downstream consumers of gasoline mixtures. Gasoline mixtures are the largest consumer area of toluene, accounting for 52% of total consumption. Toluene, as an octane enhancing agent, can improve the combustion performance of gasoline, reduce exhaust emissions, and meet national environmental protection requirements. With the increase in domestic car ownership, the consumption of gasoline has also increased, which has driven an increase in demand for toluene. However, due to the improvement in the quality of domestic gasoline, the proportion of toluene added has decreased. In addition, with the continued increase in the proportion of new energy passenger vehicles, the demand for toluene in gasoline mixtures has grown relatively slowly. In addition, one of the downstream industries, TDI, currently has no new production capacity, and the growth rate of demand for other solvent chemical products is expected to decrease. However, with the increase in production capacity of disproportionation units, the demand for disproportionation is expected to increase next year, but the important direction of the market will still be export-oriented.
Market forecast: According to toluene analysts from Business Society, the international crude oil price is expected to fluctuate slightly in 2024, with support for the cost of toluene. The supply of toluene is expected to increase, and downstream consumption growth is slow. Overall, it is expected that the toluene market will fluctuate in a range in 2024.