India's toluene import prices on upward trajectory amid supply disruption

Influx of Southeast Asia cargoes thinned

Fire at key Iranian producer disrupts supply

BIS standards spark supply concerns after 2020

New Delhi — India's rising demand for toluene during the festive season and tight availability from producers based in the Middle East and Southeast Asia are pushing India's import prices higher.

The price spread between FOB Korea and CFR India prices hit a nearly four-month high of $72/mt Oct. 27, as sellers raised their offers to India's domestic distributors in the expectation of further tightness ahead. The spread was last higher July 3, at $74.50/mt.

A fire that broke out at one Iranian toluene facility Oct. 24 was impeding dispatches to India, several local sources said. That was clubbed with fewer shipments from Thailand this month and cargo cancellations from elsewhere in Southeast Asia, sources added.

"As compared to September, October shipments from Singapore and Thailand to India have dropped by 50%," an India-based importer said. And the announcement of the fire at an Iranian plant has tipped off the market further over the weekend, the source added.

India imported only 9,522 mt of toluene from Singapore over July-August, less than a third of the 30,493 mt it imported in the second quarter, statistical data from Ministry of Commerce and Industry showed.

DOMESTIC MARKET HIT

Bullish sentiment resonated in India's domestic toluene market, where ex-tank prices along the West Coast jumped to Rupees 44-45/kg Oct. 27, up 15% from a week earlier.

Fueling to the shortage, a key manufacturer in India has also reduced run rates for its aromatics line, leading to a curtailed toluene output, another source said. About one fourth of the country's toluene requirement is met by local producers.

The slew of supply disruptions came in an inopportune time when the South Asian country is witnessing improved demand due to ongoing and upcoming festivals.

Market sources were of the view that the supply shortage would encourage local distributors to heavily draw from port inventories to secure requirements for before the year ends.

ALL EYES ON BIS

While the supply disruptions might be eased soon when producers return to normal operations, some participants held concerns over the longer term impact of a recent regulation change proposed by the India government.

Bureau of India Standards proposed in late June to revise the specification of toluene imports, raising the minimum purity content level to 99.8%, according to an amendment note seen by participants.

Such high purity level for toluene – commonly known as nitration grade level -- is not uncommon, but supply is limited to a handful of producers in the Far East.

Only about six producers located in Singapore, Taiwan, Thailand and South Korea manufacture nitration grade toluene for export purposes, sources said.

The order proposal was earmarked with a 180 days deadline, or around late December, although market participants were of the view that the date will likely be extended as the ongoing spread of coronavirus is hindering BIS inspectors to conduct site visits. Market participants were awaiting for the next update from the BIS.