FocusCorrected: China toluene imports to fall on low demand

25 July 2008 05:14  [Source: ICIS news]

Correction: In the ICIS news story headlined "China toluene imports to fall on low demand" dated 25 July 2008, please read in the 10th paragraph ...down CNY750/tonne... instead of ...down from CNY750/tonne.... A corrected story follows.

By Mahua Chakravarty and Susan Yan 

SINGAPORE (ICIS news)--Demand for toluene imports into China, which has been lacklustre in the past two months, may see limited resurgence on additional supply from new domestic plants, said traders and producers on Friday.

Domestic market prices were even expected to fall in the next two months due to slow trades and high inventory with leading producer Sinopec increasing supply from new plants, said traders in China.

Demand for imports had declined considerably in the past two months due to a seasonal fall in demand and the imposition of transportation restrictions prior to the upcoming Olympic Games, said Chinese and international traders.

Transportation of dangerous chemicals has been restricted in all Olympic co-host cities. In Beijing and Qingdao the restrictions would be in effect from 9 July to 30 September; while in Tianjin, Shanghai, Qinghuangdao and Shenyang the ban would be from 9 July to 31 August.

This ban had increased transportation costs and slowed trade, especially in the north China market, said local traders.

Toluene would now have to be transported via certain specified routes in north China, after obtaining special permission certificates from the government, they added.

"The problem is that it's very difficult to get these special permission certificates, especially for small traders and end-users," said a trader, adding that as a result many small downstream converters from the paints and coatings sectors had been forced to shut down or had reduced operating rates.

Some traders had also stopped dealing in toluene these days, which has resulted in a sluggish market in north China, they said.

This weak demand was forcing producer to consider reducing prices. "We are facing high stocks of toluene due to weak demand from traders and end-users, so what can we do now is to cut offers to encourage buying," said a source from the Sinopec Beijing sales branch.

The Chinese producer reduced its rates to CNY8,500/tonne ($1,244/tonne) EXW (ex-works) this week, down CNY750/tonne on 9 July. "Until now we have no plan to cut operating rates of aromatics units," the source added.

While the transportation ban had limited impact in the east and south China markets, prices remained on a downtrend due to seasonal weak demand, said traders.

"[As a result] I don’t think demand for imports will improve greatly after the Olympics as there are new plants supplying in the domestic market," said a key Japanese trader.

The Asian toluene market was undergoing a structural shift as China, which was until recently the region’s largest importer, had been reducing its toluene imports, the trader added.

The Chinese market has been increasingly moving towards self-sufficiency with new capacities being brought onstream and three new plants would supply more toluene to the domestic markets

In May, Zhoushan Hebon Chem Co Ltd started up its new 150,000 tonne/year toluene plant, with its supplies expected to cover substantial demand from the key eastern China market.

While Dalian Petrochemical in northeast China will produce 450,000 tonnes/year of toluene, Sinopec subsidiary Qingdao Refining and Chemical’s toluene would be used as oil-blends.

The estimated drop in imports from 2007 to 2008 was about 15,000-20,000 tonnes, with last year’s average monthly imports pegged at about 40,000 tonnes, said a trader.

Traders and producers were increasingly looking for customers in other countries like Taiwan, South Korea and southeast Asia and were even considering exporting to the US due to the slowdown of demand in the China market.

($1 = CNY6.83)

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By: Mahua Chakravarty
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