European Toluene Prices Contraction Continues in July Amidst the Bearish Demand Outlook

Hamburg (Germany)- In the final week of July, Toluene prices in the German market continued to decline, primarily due to reduced demand from downstream sectors, especially Toluene diisocyanate (TDI). The diminished need for TDI within the polyurethane industry exerted downward pressure on Toluene prices. Additionally, contraction and tightening in the construction sector further influenced the overall demand and prices in the domestic market. For the week ending July 26, 2024, Toluene prices were recorded at USD 1010 per MT, FOB Hamburg, marking a 1.5% decrease from the previous week.

The main factors affecting Toluene prices in the domestic market are the costs of naphtha and the energy needed for production.Recently, the drop in European naphtha prices has contributed to the decrease in Toluene prices. Furthermore, slower demand in the paints, polyurethane, and adhesive markets has further pressured Toluene prices downward.

Eurostat, the European Commission's statistics body, projects that Eurozone inflation will rise from 2.5% to 2.6% in July, exceeding market expectations, with services being the main driver. Despite this increase, survey data suggests that the overall downward trend in inflation is likely to persist, potentially impacting the final price momentum of Toluene in the European market. It is also important to note that current interest rates still indicate a restrictive monetary policy. The ongoing discussion about whether the European Central Bank should implement a rate cut in September will be resolved only after an additional six weeks of economic data are reviewed.

Economists at Dutch Bank forecast that the European construction sector might begin to contract in 2024. They caution that high interest rates and rising building costs have significantly reduced demand for new construction projects across Europe. However, they also note that ongoing projects and a growing focus on sustainability have so far prevented a decrease in construction volumes. Despite this, a noticeable decline is anticipated to start in 2024.

ChemAnalyst predicts that Toluene prices in the European market are expected to stay sluggish and stable over the next week due to a decrease in new orders and existing backlogs. Market participants also point out the volatility in Toluene exports and imports, along with a slowdown in deliveries from suppliers. Furthermore, European ports are still grappling with supply bottlenecks, which are significantly affecting the supply chain both domestically and internationally. These trends are attributed to a declining construction sector and elevated domestic production costs for Toluene in Europe.