FocusChina’s toluene demand may dip on motor gasoline regulations

13 June 2011 06:00  [Source: ICIS news]

By Mahua Chakravarty

SINGAPORE (ICIS)--The demand for toluene in China, Asia’s largest importing market, is weakening because of the new restrictions that were introduced by a key producer against blending the aromatic into motor gasoline (mogas), traders and producers said on Monday.

The restrictions have also caused the demand from private blending firms in the domestic market to drop, local traders and distributors said.

Sinopec, China’s largest refiner, issued restrictions on buying gasoline from private firms that blended stocks like aromatics, C5, C9, naphtha and methyl tertiary butyl ether (MTBE) on 21 May, market participants said.

Exporters in Asia were expecting Chinese importers to buy toluene cargoes in June as the inventory levels of the product in eastern China have fallen to 50,000 tonnes since late May, traders and producers said.

However, the importers were hesitant to commit to new purchases of toluene because of the weak demand from the domestic downstream blending and solvents sectors, the traders and producers added.

They added that the liquidity in the regional toluene market has slowed because of the restrictions and the current volatile prices of crude and naphtha.

Trade for cargoes on a FOB (free on board) Korea and CFR (cost & freight) China has been subdued in recent weeks, the market participants added.

Chinese toluene importers are not clear about the long-term impact of the restrictions imposed by Sinopec.

“We don’t know for how long these [restrictions] will stay, but [blending firms] don’t want to buy toluene,” said a south China-based trader and distributor.

Toluene is used as an octane booster for gasoline blending. It is also used to make solvents in paints, coatings and thinners as well as the manufacture of toluene di-isocyanate (TDI).

Spot toluene prices in Asia were at $1,055-1,065/tonne (€727.9/tonne) FOB Korea on Monday, down by $10/tonne on 10 June, according to ICIS.

($1 = €0.69)

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By: Mahua Chakravarty
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