German Toluene Market Faces Price Surge Amidst Naphtha Shortage and Economic Concerns

Hamburg (Germany): The German Toluene market has experienced a bullish trend over the past few weeks as the prices increased week-on-week on the back of high upstream Crude oil prices in the Eurozone. Also, European Naphtha prices have continued to grow, continuing a pattern that began in early August despite poor physical demand restricting some of the gains. One of the reasons for the price increase of Toluene has been a shortage of naphtha, which has been reported in Asia and Europe. Consequently, the production costs of Toluene are impacted.

According to the market participants, Russian shipments to Asia were on course for a third consecutive monthly dip in August due to the nation's refinery maintenance, logistical challenges, and increased blending demand amid a tight gasoline market.

The demand for Toluene has been heavily impacted by the slowdown in consumer inquiries from the downstream paints, coatings, and solvent manufacturing firms. According to a flash estimate, the Manufacturing PMI of Germany increased to 39.1 in August 2023 from a three-year low of 38.8 the previous month, although it stayed significantly in a contractionary zone. It was the fourteenth straight loss in German industrial activity, as consumer destocking and investor caution prompted the steepest drop in new orders since May 2020. The events heightened consumer concern and the prospect of increasing interest rates, putting downward pressure on the outputs of Toluene.

This month, the prices of Toluene observed a week-on-week rise, and in the week ending on 18th August 2023, the prices for FOB Hamburg stood at USD 1330/MT, up from USD 1290/MT the previous week, an increase of 3.1%. Similarly, the offered quotations for Toluene FD Hamburg stood at USD 1250/MT, up from USD 1210/MT the previous week, a rise of 3.3%.

These reductions in crude oil supply, which are frequently impacted by global market dynamics, ripple throughout the EU's economic landscape, eventually affecting the Toluene market. A decrease in oil supplies raises energy prices, putting pressure on businesses and consumers. Reduced output reduces supply for net oil importers like the EU, leading to scheduled stock releases.

According to the ChemAnalyst database, the market sentiments in the upcoming weeks for Toluene are anticipated to observe a slowdown in the domestic market of Germany as the prices of feedstock Naphtha are presumed to stabilize amid the cooling-off pressure on the Crude oil. Additionally, the demand outlook for Toluene is forecasted to improve in the region as the economic conditions heal up.