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China toluene hits 1-year low of Yuan 4,990/mt amid gasoline weakness

https://www.chemnet.com   Jun 26,2017 Platts
Chinese domestic toluene prices fell to a one-year low Thursday mostly due to weakness in the gasoline market. Domestic toluene was assessed at Yuan 4,990/mt Thursday, or $599.50/mt on an import parity basis. The last time it was lower was on June 9, 2016, at Yuan 4,985/mt.

Market participants said a weaker gasoline market coupled with wide availability of coal-based toluene exerted downward pressure on toluene prices. Coal-based or hydrogenated toluene, which is commonly used in Shandong province, is a by-product of coke production and has been used as an alternative gasoline blending component, a coal trader said.

"Hydrogenated toluene is currently trading in the Shandong market at Yuan 4,900/mt whereas oil-based toluene is priced at Yuan 5,100-5,200/mt on a delivered to factory basis," a toluene seller said.

"Currently, oil-based toluene is just too expensive to be used in gasoline blending even if prices have fallen a little in the last few days," the seller added.

Although hydrogenated toluene has been actively used in the Shandong region since 2005, it could not fully meet gasoline blending demand and had to be supplemented with oil-based toluene or off-spec isomer mixed xylenes, depending on which was cheaper, another toluene seller said.

Hydrogenated toluene is produced in a hydrotreater by first converting coal into coal tar and then into crude benzene and then toluene extracted from it.

"We have had a plant to produce hydrogenated toluene since 2009 and we are supplying this regularly to gasoline blenders in the Shangdong region," said a coke producer source, but he did not disclose the capacity of his plant.

China had a total annual production capacity of 5 million-6 million mt of hydrogenated toluene and most plants were running at 50-60% of capacity due to environmental concerns, he said.
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