MOSCOW (MRC) — The Asian toluene market, having basked in the warmth of China's buying spree over the past two months despite the demand destruction caused by the coronavirus to other markets, may see this respite end quicker than the onslaught of the second wave of COVID-19 infections, said S&P Global.
Over March to late May, China had ramped up its toluene imports as the price of the blendstock had slumped to attractive lows, incentivizing refiners to import octanes. At end-February, China's toluene stockpile stood at 35,500 mt, but by early June, China had accumulated nearly double that with the weekly average at eastern ports at 60,375 mt, alleviating several Asian producers of their supply glut.
Nonetheless, the slow draw down of China's domestic stocks, together with the growing logistical constrains of bringing in toluene cargoes, and the return of refineries from maintenance could throttle China's new found affection for toluene.
Of late, especially along the eastern ports of China, local importers risk being slapped with demurrage charges by shipowners as they attempt to bring in toluene. Besides the widely known congestion, local traders said the draw down of toluene in storage has been slowing despite a spike in gasoline blending within China. A handful of toluene cargoes that were previously meant for May arrival had been postponed for delivery next month.
"Changjiang port is now inundated with a few thousand tons of toluene. We should monitor whether the situation can be relieved in July," an end-user in China said. Chinese traders are only willing to consider buying toluene that can arrive from August onwards, in view of the steep contango in China's domestic market, suggesting that there may be intense competition locally.
While the upward revision will aid the absorption of refinery throughput, it will also result in the resumption of refining activity among local refiners.
China's Sinopec Zhenhai Refining & Chemical returned from the maintenance of its 10 million mt/year CDU at its mega integrated complex by July or August. The complex has a 1 million mt/year aromatics facility that includes a toluene plant of at least 410,000 mt/year capacity.
As MRC informed earlier, Sinopec Tianjin Co (Tianjin United Chemical) is in plans to bring on-stream its naphtha cracker following a turnaround. The company was to resume operations at the cracker by early-July, 2020. The cracker was shut for maintenance on May 9, 2020. Located at Tianjin, China, the cracker has an ethylene production capacity of 240,000 mt/year and propylene capacity of 100,000 mt/year.
Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).
According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 595,170 tonnes in the first five month of 2020, up by 10% year on year. Deliveries of all ethylene polymers, except for linear low density polyethylene (LLDPE), rose partially because of an increase in capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market was 457,930 tonnes in January-May 2020 (calculated by the formula production minus export plus import). Deliveris of exclusively PP random copolymer increased.
MRC