By Lu Jundian, Liu Xiaojie, Jia Ting, Sun Mengyao and Liu Jiaming, Shenyang Research Institute of Chemical Industry

Capacity

With a compound growth rate of 9.25%, China’s toluene capacity has increased from 2018 to 2022. Mainly benefiting from new large refining and chemical projects, it was up 14.85% YoY, or 3.16 million t/a YoY, to 24.42 million t/a in 2022, when toluene output – spurred by relatively high rates of new capacity utilization, supporting p-xylene units installed for some new refining and chemical units, etc. – soared 45.19% YoY to 12.46 million tons. Table 1 shows China’s main petroleum toluene producers in 2022.

As for distribution of toluene capacity, east China – close to consumption regions and supported by refining and chemical projects – has always been a major toluene producing area, and contributed 31%, around 7.57 million t/a, to the nation’s total capacity in 2022. See Figure 1 for more details. South and northeast China have taken up sharply more capacity proportions in recent years, mainly because of new capacity of large refining and chemical projects at seven large petrochemical industry bases.

Figure 1 China’s toluene capacity distribution in 2022

Domestic toluene capacity will grow greatly in 2023, but only less than 8% of producers have plans to sell toluene. After 2023, annual growth of capacity will remain at around 20%, pushing domestic total to rise 3.19 million t/a by 2025. However, most increments, similar to 2023, will be for self-use or for supporting PX units. Hence limited increments in market supply. Table 2 shows new toluene capacity from 2023 to 2025.

Output and demand

China’s toluene output shows an upward momentum from 2018 to 2022 (see Table 3 for details), and reached 12.46 million tons in 2022.

Downstream demand center of toluene continued to move towards chemical industry in 2022. Gasoline industry made up 23% of domestic demand for toluene in 2022, lower than 28% in 2021 and 30% in 2020. Output of benzoic acid and nitrotoluene fell due to policies to ration the power supply, leading to decrease in toluene consumption in 2022, when toluene demand proportion of disproportionation soared, mainly attributable to widening difference in prices between pure benzene and toluene, development of new disproportionation technologies (see Figure 2 for more details).

Figure 2 China’s downstream demand areas of toluene in 2022

In 2023, demand for toluene is forecast to fall continually in the field of coating solvents, as environmental pressure forces coating solvent producers to gradually switch to environmentally friendly water-based products. However, demand for toluene may increase in gasoline industry and fast-growing polyurethane industry.

Import and export

Toluene capacity expansion has gradually resulted in oversupply in recent years. Hence decreasing import volume but increasing export volume. China imported 67 700 tons of toluene in 2022, lowering degree of dependence on imports to 0.46%. Export volume for 2022 reached 649 800 tons. Figure 3 and Figure 4 show import and export of toluene from 2018 to 2022. It is forecast that domestic toluene capacity will grow continually, import volume will continue to decline, and export volume may decrease, all in 2023.

Figure 3 China’s toluene import from 2018 to 2022

Figure 4 China’s toluene export from 2018 to 2022

China imported toluene mainly from Asian countries and regions, and South Korea was the largest source in both 2021 and 2022. See Figure 5 for more details.

Figure 5 China’s toluene import sources from 2021 to 2022

China imported 67 700 tons of toluene in 2022, with the volume in March accounting for the largest proportion of 36.92%, equivalent to 24 985.04 tons. There were no toluene imports in May and December, due to factors like import price inversion, domestic oversupply, etc. Figure 6 shows China’s monthly import volume of toluene and average prices in 2022.

Figure 6 China’s monthly import volume of toluene and average prices in 2022

In 2022, China exported 649 800 tons of toluene in 2022, and the highest monthly export volume was in August, reaching 109 501.76 tons, mainly stimulated by high demand in southeast Asia region and accounting for 16.85% of domestic total. Figure 7 shows China’s monthly export volume of toluene and average prices in 2022.

Figure 7 China’s monthly export volume of toluene and average prices in 2022

Forecast

Domestic demand for toluene remained weak in 2022, and toluene capacity expansion led to a year-on-year decrease in import volume, which is forecast to show a downward trend in 2023, given domestic expanding toluene capacity and rising toluene degree of self-sufficiency. Therefore, toluene export trade will be stimulated in 2023.