Toluene and mixed xylenes driven up by strong gasoline

In the beginning of 2025, China toluene and mixed xylenes markets made a good start with prices rising. As of Jan 10, coastal toluene price was assessed at 6,450yuan/mt, up 420yuan/mt on Dec 31, and that of MX at 6,630yuan/mt, up 450yuan/mt over the same period. And Shandong toluene price advanced by 455yuan/mt from Dec 31 to 6,355yuan/mt and Jan 10, and MX price gained 445yuan/mt to 6,485yuan/mt.

The rise in prices is attributed to several factors. Firstly, downstream consumers entered to buy to stock up prior to the Spring Festival, and transactions of gasoline were active, pushing up prices of blending components. Secondly, gasoline supply was tight and inventory was low, with independent refineries kept CDUs running with low operating rates. Thirdly, Sinopec Zhenhai was hit by fire, and its toluene and MX production was affected. And lastly, China government raised the import tariff for fuel oil from 1% to 3% from Jan 2025 onwards. In addition, news came that ports in Shandong Province banned berthing oil tankers sanctioned by the US, and then toluene and MX prices hiked amid speculations.

Demand for gasoline typically picks up in Jan before China's Spring Festival. And as a result, boosted by gasoline demand, toluene and MX prices move up. Gasoline prices from independent refineries in Shandong have gained 276yuan/mt from Dec 31 to Jan 8. The price has been rising even since mid-Nov 2024.

In Nov-Dec 2024, transactions of gasoline in Shandong recorded new high, and the trading still remained active in the first week of Jan. However, CDU operating rate in Shandong was not high, at around 50-60%, lower than the levels in the same period of last years. Gasoline output was also quite low. And therefore, the boom of demand coupled with low gasoline stocks drove up toluene and MX prices recently.

On Jan 7 evening, Sinopec Zhenhai's No. 5 CDU was hit by fire, thus affecting the feedstock for aromatics including toluene and MX.

In addition, from Jan 1 2025, the import tariff rate on fuel oil will be increased from the original 1% to 3%. Fuel oil, as an important raw material supplement to independent refineries, is usually mixed with crude oil, and then input into CDUs or used as raw material for secondary units. The tariff increase will directly affect the refinery's raw material procurement costs. It is expected that the import cost will increase by about 80yuan per ton. At the same time, news that some oil tankers were banned from berthing also caused the market to speculate.

Currently, the importing window for MX remains shut with Chines domestic yuan MX price lower than CFR China price by 100-200yuan/mt. With limited imports, tank inventory of MX keeps decreasing in China coastal regions, indicating tight supply of MX.

In the past two weeks, the average daily production to sales ratio of toluene and MX in Shandong Refinery all exceeded 100%. In a conclusion, toluene and MX prices move up persistently. But as PX margin based on MX has turned negative, some PX units cut operating rates or shut. In addition, TD margin has also declined heavily. With support from gasoline, toluene and MX price will still be depending on crude oil and gasoline demand.