Toluene Market Dragged down by Drastic Decrease of Crude Oil Prices in 2014

By Hao Lianping, Transportation and Sales Center of Sinopec Tianjin Petrochemical Co, Ltd.

Slowdown of production growth

With the rapid development of the national economy, the demand for toluene has increased constantly. China’s capacity to make toluene rose significantly in the past, however, growth has slowed down in recent years. In 2014, the domestic capacity to produce toluene reached 7.79 million t/a (see table1), and the output was more than 5.0 million tons. China’s output of toluene continued to increase through 2014, but the supply was still relatively tight and import was required. The import volume reached 933 thousand tons. China’s production and consumption of toluene in recent years are listed in table 2.
During 2011-2012, China’s import volume and export volume of toluene remained basically stable, and the overall supply and demand of market fluctuated gently. The major import source was South Korea, accounting for over 50% of the total volume imported, and Japan came next. In the market share of imports, more than 90% came from Asia, and China became the largest toluene consumer in Asia.
In 2013, the import volume rose notably. The main reason for this was that the inventory in domestic ports was low overall. Influenced by the high profit of the toluene market in 2013, the import volume of toluene increased significantly and reached 689.6 thousand tons in the first half of 2014, and the monthly average import volume was 89.7 thousand tons during January-August. The main reason for the decrease of imports in the second half was that new PX (para-xylene) units with a capacity of over 5.0 million t/a in South Korea, Japan, Singapore and India were put into operation, the demand for toluene climbed and the Korean FOB price of toluene increased, resulting in a drastic decrease of the volume imported by China, dropping to 18.3 thousand tons in August. Especially in the fourth quarter, the prices of crude oil futures in the international market decreased, the operating rates of downstream terminal enterprises reduced and the import volume dropped quickly. However, in general, China’s import volume of toluene in 2014 was still larger than that in 2013.

Environmental protection storm swept downstream sectors

In recent years, China’s toluene consumption mix has changed notably. The demand for toluene in the traditional solvent sector has grown relatively slowly in the last two years, and the stable growth of toluene apparent consumption has been driven by fine chemical synthesis. At the same time, the domestic blended oil market has been relatively active, promoting the growth of toluene consumption. At present, the consumption of toluene in blended oil accounts for more than 30% of the total consumption.
In 2013, the price difference between toluene and xylene as well as pure benzene expanded, and the disproportionation units earned higher profits. Fujian Dragon Aromatics Co., Ltd completed its new 1.6 million t/a PX expansion project, the demand for isomeric xylene was larger, the operating rate of disproportionation units in each plant was maintained at a high level, so the overall operating rate of TDP (toluene disproportionation) was higher. However, in 2014, the profits of toluene plants were significantly narrowed, and most enterprises took measures like reducing the operating rate and cutting production, so the overall growth of demand for toluene in disproportionation units was limited.

Table 1    Major toluene producers in China in 2014

Location    Producer    Capacity (kt/a)
Northeast China    PetroChina Daqing Petrochemical Co Ltd    204
    PetroChina Jilin Petrochemical Co Ltd    120
    PetroChina Fushun Petrochemical Co Ltd    200
    PetroChina Dalian Petrochemical Co Ltd    450
    Shenyang Paraffin-wax Chemical Co Ltd????    30
    Dalian Fujia Dahua Petrochemical Co Ltd    250
    Panjin Ethylene Co Ltd?    150
    PetroChina Jinzhou Petrochemical Co Ltd?    28
    PetroChina Jinxi Petrochemical Co Ltd?    18
North China    Sinopec Tianjin Petrochemical Co Ltd    405
    Sinopec Shijiazhuang Refining & Chemical Co Ltd    27
    Sinopec Yanshan Petrochemical Co Ltd    96
    Sinopec Qilu Petrochemical Co Ltd    282
    Qingdao Lidong Chemical Co Ltd    184
    Shandong Changyi Petrochemical Co Ltd    100
    Shandong Chambroad Petrochemicals Co Ltd    20
    Shandong Qiwangda Group    70
    Hebei Xinqiyuan Energy Technology Development Co Ltd    100
    Renqiu?Petrochemical Co Ltd    130
East China    Sinopec Shanghai Petrochemical Co Ltd??    480
    Nanjing Refinery?    114
    Sinopec Yangzi Petrochemical Co Ltd    300
    Sinopec Zhenhai Refining & Chemical Co Ltd    360
    BASF-YPC Co Ltd    120
    Sinopec Jinling Petrochemical Co Ltd    354
    Shanghai Secco Petrochemical Co Ltd    160
    Zhoushan Hebang Chemical Co Ltd    150
    Sinopec Jiujiang?Petrochemical Co Ltd    172
    Huachen Chemical Co Ltd    60
Central China    Wuhan Petrochemical Co Ltd    144
    Sinopec Changling?Petrochemical Co Ltd?    70
    Sinopec Luoyang Petrochemical Co Ltd    120
South China    Sinopec Guangzhou Petrochemical Co Ltd?    150
    Sinopec Maoming Petrochemical Co Ltd    140
    Sinopec Zhanjiang Dongxing Petrochemical Co Ltd    50
    CNOOC and Shell Petrochemicals Co Ltd    120
    CNOOC Huizhou Petrochemical Co Ltd?    160
    CNOOC Refining & Chemical Co Ltd    220
    PetroChina Qinzhou?Refinery    150
    Sinochem Quanzhou Petrochemical Co Ltd?    280
    Sinopec Fujian Refining & Chemical Co Ltd??    250
    Fujian Dragon Aromatics Co Ltd    300
Northwest China    PetroChina Lanzhou Petrochemical Co Ltd    250
    PetroChina Dushanzi Petrochemical Co Ltd    220
    PetroChina Urumqi Petrochemical Co Ltd    30
Total         7 788


Table 2  China’s production and consumption of toluene during 2011- September 2014  

Year    2011    2012    2013    2014(Jan.-Sep.)
Capacity    6 488    7 238    7 468    7 788
Output    4 201.0    4 261.0    5 156.0    3 810.5
Import volume    653.0    662.8    811.1    807.1
Export volume    8.0    6.7    3.1    1.6
Net import volume    645.0    656.1    808    805.5
Dependency on imports (%)    13.48    13.48    13.60    17.45
Apparent consumption    4 846.0    4 917.1    5 964.0    4 616.0


Toluene is mainly used to synthesize TDI (toluene diisocyanate), nitrotoluene, benzoic acid, chlorine toluene, benzyl chloride, cresol and para-toluene sulfonic acid. In 2013, only a few chemical synthesis plants have new and expansion projects (such as 100 kt/a TDI unit of Fujian Southeast Electrochemical Co., Ltd). In 2013, two factors had a great impact on the chemical synthesis plants. One was that the price of toluene was on the high side in the first half, resulting in poor profitability of the plants. The other was that the domestic economic environment was poor, so the demand for chemical synthetic products was also slack. In 2014, the chemical synthesis market was more depressed, especially the spread of market panic caused by a price reduction in the bulk raw materials market, so demand growth was limited.
Toluene is used as a solvent in the glue, coatings and ink sectors. With the increasing awareness of environmental protection, the demand for environment-friendly products has maintained a trend of growth. Good alternatives have appeared and started to grab market share. Therefore, demand for toluene in the solvent sector has shrunk.
In recent years, due to factors like the increasing awareness of environmental protection, structure adjustment and quality upgrading of oil products have been constant. At present, Sinopec Group and CNPC have more stringent requirements on the quality of outsourced goods, and they have constantly increased the detection of indexes such as sulfur content, naphthalene content, methylal, sec-butyl ester, dimethyl carbonate, aniline, water-soluble acid and alkali and oxygenated chemicals, making the original blended oil formulations using mixed aromatics, mixed benzene and other mixed materials not suitable to the new detection requirements. With the gradual upgrading of oil products, the original National III standard gasoline will be gradually replaced by National IV standard gasoline and National V standard gasoline, making the advantages of petroleum toluene as a more desirable raw material in blended oil sector more prominent.
However, affected by the lower price of xylene and the facile threshold of coking hydrogenation enterprises, the proportion of toluene in blended oil in some regions changed considerably in 2014. The proportion of petroleum toluene in the blended oil sector will also increase further.

How to stabilize the toluene market has become the embarrassing part of the current situation

In 2014, the price trend of toluene reflects a relationship between toluene prices and international crude oil prices. With the drop of crude oil prices, the price of toluene reduced gradually. In 2014, the average annual price of toluene hit the lowest level in four years, and the difference between the high price and low price was the narrowest since the financial crisis in 2008. In 2014, the toluene market bid farewell to the high price trend and entered into new low-price era.
As a whole, with the price trend of crude oil, the trend of toluene price was divided into two stages in 2014. The price of toluene fluctuated in the first half, and decreased drastically in the second half. The toluene market eventually took a downward trend, opening up a new low-price era.
At present, the toluene market tends to be stable, however, the price of crude oil has not hit the bottom, and price competition continues to exist. The bottom price of crude oil has not appeared, and how to stabilize the toluene market has become the embarrassing part of the current situation.