Toluene Prices Slide in Europe as Construction Sector Struggles and Naphtha Costs Drop
Toluene Prices Slide in Europe as Construction Sector Struggles and Naphtha Costs Drop

Toluene Prices Slide in Europe as Construction Sector Struggles and Naphtha Costs Drop

  • 27-Aug-2024 7:41 PM
  • Journalist: Robert Hume

Toluene prices in the European market sustained their bearish momentum, primarily driven by diminishing demand from downstream industries. A significant factor in this trend of Toluene has been the stagnant demand for Toluene diisocyanate (TDI), a critical ingredient in polyurethane production, and reduced production costs in the European market. The construction sector's ongoing contraction has further contributed to the weakened demand, amplifying the downward pressure on Toluene prices. As suppliers and producers grapple with reduced market activity, the domestic market has responded with lower prices.

Germany's construction sector is projected to shrink, driven by rising interest rates, a decline in building permits, and soaring construction costs. These challenges have pushed major developers into insolvency, further exacerbating the sector's downturn. The combination of these factors is expected to significantly impact the construction landscape in Germany over the next year.

Key elements influencing the Toluene market include the cost of naphtha and the energy needed for production. Recent declines in European naphtha prices have also played a role in the continued fall of Toluene prices. Additionally, sluggish demand from paints, polyurethane, and adhesive sectors has further driven prices downward, reflecting the broader market's challenges. Toluene and its derivative industry analysts noted that despite a sharp increase in supplies, high demand is not anticipated, while suppliers are prepared to ramp up operations as needed.

Adnoc Gas (UAE) plans to ship liquefied natural gas cargoes to either Europe or Asia, choosing the market that offers greater profitability and to complete the demand volume in the respective market. Meanwhile, gasoline refining margins in Northwest Europe dropped by 70 cents to approximately $10.12 per barrel, following a decline in Atlantic basin inventories and deteriorating export economics.

The European Central Bank’s current interest rates indicate that a restrictive monetary policy remains in effect, with a potential rate cut in September dependent on further economic data over the next six weeks. In this environment, Toluene prices in the European market are expected to remain sluggish in the coming weeks, to be driven by a decline in new orders and backlogs.  In August, sentiment among Germany's manufacturing sectors that are heavily reliant on petrochemicals fell to its lowest point since February. Industry observers anticipate that this lack of momentum in the market will continue to exert downward pressure on Toluene prices in the near term. Analysts, however, are optimistic about the upcoming quarter, forecasting a potential recovery in Germany's economy towards the end of 2024. This anticipated rebound comes after the economic shocks experienced over the past two years due to the energy crisis and high interest rates.

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