FocusChina's high inventory to drag on Asian toluene market

By Mahua Chakravarty

SINGAPORE (ICIS news)--The Asian toluene market is likely to remain subdued in the coming weeks as a high inventory of the material in China – the region’s largest market – will keep its import demand soft, industry sources said on Friday.

In eastern China, a total of 170,000 tonnes of toluene was stuck in tanks, while another 50,000 tonnes were stranded in the southern part of the country, they said.

"It could take about two to three months before stocks can go down," said an east China-based trader.

Toluene stocks reached record-high levels in China due to prevailing weak demand, market sources said.

"The normal stock levels in east China should be 50,000-60,000 tonnes, so now there is [almost] four months of excess stock," the trader said.

China imports 40,000 tonnes of toluene on a monthly basis based on term contracts, which meant that inventory would continue to build at the ports if demand failed to pick up, market sources said.

Throughout April, there was a lack of trading in Asia on cargoes based on  FOB (free on board) Korea and CFR (cost and freight) China, said a Korean producer.

"It’s hard to see any demand these days, [as] stocks have to decrease so that demand can come up," he added.

Given the challenge of finding find tank space in China these days, no one wanted to buy fresh and re-sell cargoes, traders said.

Spot toluene prices were fluctuating at $30/tonne (€23/tonne) range in the past four weeks, with values hovering at $885-915/tonne. Sellers were wary that the current poor demand and high regional supply would push toluene prices lower.

Imports of spot materials into China had almost come to a halt in the past two months as CFR China prices were well below US dollar values, a Korean producer said.

In eastern China, negotiations were reported at yuan (CNY) 6,950/tonne ex-tank level on Friday, which importers calculated to be about $840/tonne, $55-70/tonne below current FOB Korea values.

Local sales of imported material in the domestic market were sluggish for the product, more due to high supply than any slowdown from the downstream solvents sector, local traders said.

A south China-based importer said: "Demand is normal but inventory is too high, so buyers are taking a wait-and-see stance and this is pushing down local prices slowly."

($1 = €0.76/$1 = CNY6.83)