Hamburg (Germany): In late June 2024, Toluene prices in the German market continued to decline due to reduced demand from downstream sectors, particularly Toluene diisocyanate (TDI). The weak demand for TDI from the polyurethane industries negatively impacted Toluene prices. Additionally, car sales in Germany dropped, leading to decreased consumption of polyurethane foam in the automotive sector and subsequently lower orders for Toluene components. Adding to this, the tight and reduced construction sector has impacted final demand and prices in the domestic market. As of the week ending June 28th, 2024, Toluene prices were observed at USD 1030 per MT, FOB Hamburg, marking an overall decline of 1.4% from the previous week.

The primary factors affecting Toluene prices in the domestic market are the costs of naphtha and the energy cost required for production. Recently, European naphtha prices have declined, contributing to the drop in Toluene prices. The paints, polyurethane, and adhesive markets also showed slower demand, further driving down prices.

The significant decline in European naphtha prices, compared to those in Asia, has resulted in increased shipments of European naphtha to the East. Market experts noted that eurozone inflation has continued to decrease, exceeding a 2% drop, due to falling energy prices and reduced pressure on industrial goods. This has lowered the overall production cost of benzene in Europe. Additionally, imports of naphtha and LPG from the Middle East and Russia have significantly decreased due to reduced demand in Asia. The oversupply of naphtha in Europe has led to a sharp price drop, impacting the final cost of Toluene production.

The decline was primarily fuelled by reduced production in the automotive industry and a further downturn in the construction sector. Notably, activity in the construction sector has decreased for three consecutive months.

As European crude oil buyers shift towards regional suppliers, US shipments to the continent declined again in June, hitting a two-year low. According to US media and trading sources, US crude exports to Europe slowed to 1.45 million barrels per day (mbpd) last month, marking the lowest level since July 2022 and a 27% decrease from June 2023. ChemAnalyst predicts that Toluene prices in the European market will likely remain sluggish and stable in the coming week due to a decrease in new orders and backlogs. The report also highlights volatility in both exports and imports, alongside a slowdown in supplier Toluene deliveries. These trends are attributed to the weakening construction sector and high domestic production costs for Toluene.