US Toluene Prices Rebound in January Amidst Global Market Dynamics and Inflationary Pressures

Houston- Toluene prices in the US market rebounded in the first week of January 2024 amidst inclined naphtha prices accompanied by other chief external and internal factors impacting the final prices of benzene in the US market. In December, headline inflation in the United States increased, while core inflation slowed down, maintaining the Federal Reserve's trajectory to potentially initiate a target rate reduction as early as March 2024. Apart from factors such as increased production cost, the increased demand for Toluene from the Asian market amidst the maintenance shutdown of major Toluene manufacturing units in Asian countries such as China, Taiwan, and Singapore has raised the demand outlook. On the week ending January 5th, Toluene prices in the US market were witnessed at USD 1030 per MT, FOB Louisiana, with a weekly positive difference of 1%.

The US Consumer Price Index (CPI) rose to a 3.4% annual rate in December, up from a 3.1% rate in November, according to the latest report from the Labor Department. The inclined rate impacted the production cost, becoming heavy on consumer pockets. Major players in the Toluene industry have expressed concerns about potential significant disruptions in the sector, responsible for 90% of global trade. These disruptions could arise from various factors like ongoing conflicts and droughts affecting crucial routes such as the Panama Canal. The intricate schedules of large container ships, fuel tankers, and other commodity carriers are likely to face disruptions throughout the year.

The start of the year likely saw US gas inventories with a 14% surplus compared to the five-year average, attributed to milder weather. The Energy Information Administration (EIA) anticipates that demand growth will exceed supply growth in the current year, reducing the surplus to 8% of the five-year average by year-end. Despite this reduction, crude oil and naphtha inventories are expected to remain sufficiently high by the conclusion of 2024, preventing substantial upward pressure on Toluene prices.

Toluene prices are influenced significantly by factors such as subdued demand projections from end-use manufacturing sectors like Toluene Diisocyanate, coatings, adhesives, and solvent industries. Additionally, geopolitical tensions and conflicts along a crucial trade route, the Red Sea, have disrupted the overall price dynamics of Toluene. Retailers and buyers have refrained from placing higher orders due to these uncertainties. Furthermore, in line with the domestic demand outlook, manufacturing activity in the Eurozone remained contracted and constrained in the last quarter. The ultimate impact of these factors is expected to be reflected in the final selling prices of Toluene in the US market. As per ChemAnalyst, Toluene prices in the US market are expected to move steadily in the upcoming week amidst the inclined inflation rate and heavy production costs in the domestic market.