Hamburg, Germany: The prices of Toluene have been increasing in Germany owing to an upsurge in production costs with improving market conditions. However, With shrinking export markets, the Toluene market faces continued pricing pressure and elevated reliance on upstream Crude Oil costs. As per the figures, chemical production in Europe declined 4.5% year on year in the 11 months to the end of November. Toluene is a feedstock for producing several chemicals like Benzene, Mixed Xylene, etc.

According to International Energy Agency (IEA), global crude oil demand has surged as China lifted its pandemic restrictions and resumed its trade activities, alleviating the cost pressure on its downstream, Toluene. The ChemAnalyst database has shown that Toluene prices have risen to approximately 3% in the week ending 20th January in the German domestic market on a FOB basis. On the upstream front, the German refineries in Leuna and Schwedt have halted the purchases of Russian crude oil at the end of 2022. Schwedt is one of the largest refineries in Germany and supplies almost 90% of the fuel in Germany.

Furthermore, on the demand side, the market participants have reported that the construction industry has been improving slightly as new orders from the paints and coatings sectors have progressed slower. However, wider economic constraints have led to limited procurement of downstream MIBK. Benzene has other Toluene derivatives, limiting the market growth of Toluene in the European market.

According to ChemAnalyst, the pricing dynamics of Toluene might witness an upward trajectory in the upcoming weeks. The tight monetary policies, along with a rise in production costs, are likely to propel the market dynamics of Toluene in the German market. Additionally, to combat the record-high inflation in European nations, the European Central Bank (ECB) plans to increase interest rates by 50 basis points in February and March and will continue in the coming months.