Upward space for toluene and MX capped

East China toluene and mixed xylenes markets were little changed for much of July, until the end of the month when the prices rose slightly before pulling back. In terms of demand, blending demand in Shandong was lackluster, due to higher cost because of stricter regulation in Shandong. In the latter half of July, toluene price advanced notably, as TDP margins were good with wide spread between benzene and toluene.

Rough calculation of TDP margin = benzene + isomer-MX–2*toluene–500yuan/mt

Toluene and MX port inventory first increased but then reduced in July. In the first half month, the inventory piled up as delivery was slow. In the latter half month, it declined as some plants entered to buy toluene for TDP units and also the cargo arrivals were delayed due to the typhoon. In Aug, toluene cargoes are expected to decrease compared to that in July, and Sinochem Quanzhou could reduce toluene supply to East China, while MX cargoes are little changed.

As for alternative blending components, MTBE price declined sharply in the beginning of July, due to the slump in crude oil price as well as increase in MTBE sypply, but then MTBE market stabilized.

In Aug, toluene and MX market could be supported by reduced cargo arrivals and requirements for toluene in TDP units. However, it would be difficult for blending demand to improve, and benzene market shows signs of weakness, hence the upward space for toluene and MX is capped.