Toluene and MX impacted by pullback in crude oil and pandemic

China toluene and mixed xylenes markets are pulling back recently. Firstly, crude oil pares rise, less supportive to toluene and MX. Secondly, due to the dire situation of pandemic in China, logistics are affected with some cities locked down. As a result, prices of refined oil products fall, and demand for toluene and MX weakens. Transaction in East China market is lackluster with tepid discussions.

As a matter of fact, toluene and MX inventory in East China ports has been hovering low since 2022, especially for MX. Demand was good earlier and thus delivery of goods was fast, leading to low inventory. Recently, with demand weakening and delivery of goods slowing down, yet port inventory continued staying low, as fewer cargoes are arriving. Due to the spread of pandemic in China, imported cargoes are affected, and in addition, domestic supply also decreases with some refineries cutting operating rates.

On demand side, it is not optimistic. MX to toluene price spread has narrowed to around 200yuan/mt, and benzene to toluene spread also stands low, reflecting weak TDP margins and reduced demand for toluene, while demand from downstream fine chemicals remains good. MX is more impacted by ebbing demand from gasoline blending. Therefore, MX price declines faster than that of toluene.

In terms of plant operations, with Sinopec Yangtze and GS Qingdao Lidong having shut down their reformers, plant operating rate of toluene and MX has decreased obviously. Meanwhile, some independent refineries in Shandong have also reduced operating rates.

However, the impact from crude oil and pandemic plays increasing important role in toluene and MX market. Blending demand is apparently hit by the measures to curb the spread of the pandemic. Market sentiment is dampened by the lockdown of Shanghai City.

In Apr, if the pandemic gets stemmed, toluene and MX market may move up with crude oil consolidating at highs, but if the pandemic continues, there will be adverse impact on toluene and MX markets.