Subdued Demand Leaves Stockpiles of Toluene in Europe

Toluene prices in the European market exhibited subdued behavior as the available stockpile was sufficient to meet both domestic and international demand expectations. This has led to a softer outlook for the chemical, even as oil prices edged up in mid-October due to uncertainty surrounding potential developments in the Middle East conflict. This follows a previous session where demand concerns had driven the market to its lowest levels since early October. Benchmark oil prices surged sharply earlier in the month, as risks to global oil supply regained focus.

In the wider chemicals industry, the overcapacity of Toluene across several places is expected to bring fundamental changes, where differentiation and innovation will be key to maintaining competitiveness. Operators are now running barges at high capacity, and coupled with overall weak demand, freight costs from the Amsterdam-Rotterdam-Antwerp (ARA) hub to Germany have seen reductions.

Additionally, an increase in the domestic supply of Toluene in western Germany has been noted. Consumers in recent weeks have taken advantage of falling distillate prices for Toluene, stockpiling the commodity ahead of the winter season. Although prices spiked sharply at the start of October, another wave of demand occurred as buyers reacted to escalating tensions in the Middle East. However, demand for Toluene declined sharply by midweek, as most consumers had already stocked up sufficiently and were unwilling to pay premium prices. A logistical bottleneck in deliveries further reduced demand for Toluene from the end-use manufacturing units.

In the automotive paints sector, the chemical industry remains random, with supply limitations and market pressures continuing to impact Toluene prices. Although prices are anticipated to stay stable, they are expected to remain subdued in the coming week, mainly due to reduced new orders and persistent industry backlogs. Additionally, plant closures across Europe, coupled with disruptions in the U.S. and Asia, have worsened supply chain difficulties, limiting the global availability of Toluene. These shutdowns have negatively affected production volumes, making it more challenging to meet worldwide demand. Consequently, market sentiment for Toluene remains lackluster, with weak demand projections in the Toluene diisocyanate (TDI) segment contributing to the overall difficulties.

The country's construction sector plunged deeper in the middle of the third quarter, primarily due to ongoing weakness in the housing market. ChemAnalyst forecasts that Toluene prices are expected to stay stable yet moving in the upcoming week, mainly because of a balanced demand-supply volume.