India could stop toluene imports on high inventories – sources

Trixie Yap

26-Jul-2016

Focus article by Trixie Yap

SINGAPORE (ICIS)–India-based buyers could soon halt the imports of toluene cargoes for August or September loading because of high shoretank inventory levels and tepid downstream demand, market players said on Tuesday.

Shoretank inventories in the west coast of India have increased from 55,000-6000 tonnes last week to 60,000-65,000 tonnes currently, several import traders said, adding that some 40,000-45,000 tonnes of toluene were being held at Kandla port alone.

“These inventories are sufficient for consumption all the way until the October period and it is not necessary for anyone to take in more CFR [cost & freight] India cargoes,” one west coast India-based importer said.

Inventory levels were driven higher by a combination of excessive buying from traders for June and July loading shipments and slower-than-expected offtaking from downstream end-users in the local market.

Import traders bought a total of 35,000-40,000 tonnes of June loading cargoes and up to 25,000 tonnes of July loading cargoes, according to several market players.

Demand in the local rupee-denominated market – particularly from key solvent and agricultural sectors – was persistently weak because of the ongoing monsoon season, which started from the first half of June.

Despite strong demand from downstream sectors such as pharmaceutical end-users, ex-tank prices failed to gain upward momentum because these buyers were only procuring material on a need-to basis.

“It was a buyer’s market and the buyers knew it themselves, so they kept their buying activities at a minimum so as to garner more discounts from distributors who had inventory pressures,” one east coast India-based importer said.

Mounting losses at distributors because of consistent decreases in rupee-denominated prices was the second reason for this potential move by India-based importers.

Rupee-denominated prices were at Rs41.00-42.50/kg ex-tank as of the closing on 25 July, according to ICIS data.

However, importers said that costs that they have incurred for June or July loading shipments were at least Rs44.50-46.00/kg ex-tank depending on the arrival timing of the cargo.

“Almost every importer is losing money and it is only logical for buyers to consider stopping purchases for August or September shipments until the market stabilises,” one west coast India-based importer said.

However, some market players said that it remains to be seen if such a decision by key distributors will reverse the current dire situation faced by most.

The higher costs incurred by distributors from earlier arrival cargoes will still mean that they are not able to liquidate their cargoes at current domestic ex-tank levels. This in turn may still result in smaller distributors offloading at lower prices if they need to regenerate cashflow.

Furthermore, some importers had already procured August shipments – which were mostly of southeast Asia-origin – in the past two weeks.

READ MORE

Global News + ICIS Chemical Business (ICB)

See the full picture, with unlimited access to ICIS chemicals news across all markets and regions, plus ICB, the industry-leading magazine for the chemicals industry.

Contact us

Now, more than ever, dynamic insights are key to navigating complex, volatile commodity markets. Access to expert insights on the latest industry developments and tracking market changes are vital in making sustainable business decisions.

Want to learn about how we can work together to bring you actionable insight and support your business decisions?

Need Help?

Need Help?