Toluene prices shored up by recovering of TDP margin

TDP margin has been recovering since Jul 2023, especially when benzene price soared persistently from Dec onwards which led to TDP margin flipping back to positive.

In Jan-Feb 2024, TDP margin hovered at the high level in nearly 1 year, supportive to the operations of TDP units and shoring up toluene prices. In addition, demand for gasoline blending components was good outside China in Jan-Feb, and therefore, discussion for toluene exports from China was active. China domestic toluene price advanced, approaching the level of mixed xylenes, with price spread narrowing continuously.

The tank inventory of toluene and MX at East China ports has rebounded to high. As of the week ending Feb 28, toluene inventory was down 6kt week-on-week to 99kt and MX inventory was up 2.7kt w-o-w to 94.8kt. It was heard that some tanks storing toluene and MX are reaching the maximum capability. Hengli Petrochemical plans to undergo maintenance on its reformer beginning from early Apr, and it would suspend the selling of toluene before the maintenance. As a result, with reduced cargoes arrivals to East China, the inventory is expected to decrease. However, the inventory reduction could be slow in Mar as gasoline blending demand is lukewarm.

The price spread of US to Asian toluene and MX has been widening since early Jan 2024, indicating opening of arbitrage window from Asia to the US. Data showed South Korea would export a large amount of aromatics to US, while supply would be tight in Asian market due to plant turnarounds in Mar-Apr as well as gasoline blending demand from US. In addition, toluene market would be supported by high benzene price. China toluene and MX markets are anticipated to stay firm in Mar.