Toluene and MX prices advance to this year's new high amid tight supply

China toluene and mixed xylenes have advanced sharply since Jul, especially in early Aug. East China toluene price hiked from 7,250yuan/mt in the beginning of Jul to 7,950yuan/mt as of Aug 7, up 9.7%; and MX price rose from 7,530yuan/mt to 8,750yuan/mt over the same period, up 16.2%.

Firstly, crude oil price hiked, with WTI crude futures up from $69.79/bbl in early Jul to $81.94/bbl on Aug 7, up 17.4%, supportive to toluene and MX prices in terms of cost.

Secondly, with limited cargo arrivals in Jul, toluene and MX supply was tight, especially for MX. In Jul, demand for gasoline outside China was strong, and gasoline price rose in Singapore, driving up China's gasoline exports. Therefore, state-owned refineries in China allocated more toluene and MX to blending pool, and thus reduced the quantity for sale. In addition, China MX imports declined from 82kt in Jun to 58kt in Jul.

Thirdly, after CNOOC Huizhou Phase II started its new PX plant in Jun and CNOOC Daxie ramped up the operating rate of PX plant, the selling volume of toluene and MX decreased.

As a result, East China port inventory of toluene had dropped to 31.6kt and that of MX to 16.5kt as of Aug 2, new low in recent years. In Aug, toluene inventory could increase as some plants turn to selling toluene due to poor economics of TDP units, and some toluene cargoes loaded in late Jul were bounded for East China.

China PX plant operating rate hiked rapidly in Jul, indicating good demand for MX. However, after the surge in MX price, PX-MX processing spread has declined sharply, and some PX plant is heard to sell MX. In addition, the price spread of gasoline to MX is also narrowing.

As for toluene, TDP profit has flipped to positive, as benzene price has advanced sharply and its spread to toluene has widened. The selling volume of toluene would be affected by TDP unit operations.