Global Toluene: Toluene Market Forecast to Remain Positive Despite Near-Term Economic Uncertainties

 

Global Toluene

Toluene is an aromatic hydrocarbon derived primarily from petroleum sources. Major applications of toluene include blending with gasoline to increase the octane rating and as a feedstock for production of benzene. Benzene is further used in plastics, resins, and synthetic fibers. Other derivatives of toluene include toluene diisocyanate, used in the production of polyurethane foams, coatings, and elastomers.

In 2020, the Global Toluene stood at over 28 million tons and is estimated to grow at a CAGR of around 4% during 2021-2026. Growth will be supported by increased petrochemical capacities and continued demand from gasoline blending. However, near-term challenges from the COVID-19 pandemic including reduced mobility and industrial activity are weighing on overall demand and pricing.

Sustained Demand from Petrochemical Applications

Petrochemical intermediates remain the largest end-use segment for toluene, accounting for over 60% of total demand. Benzene is the most important derivative representing more than half of the total petrochemical consumption. With resurgent demand in various downstream end-use sectors such as packaging, construction, automotive, and textiles, benzene demand is expected to increase at a moderate pace.

This will have a positive flow-through effect on toluene demand from its primary petrochemical applications. Additional demand boost will come from rapid capacity additions in Chinese and Middle Eastern facilities for benzene and its co-products like styrene and BPA. Higher polymer and fibers demand from Asia and recovering Western economies will support the utilization of new benzene capacities coming online.

Gasoline Blending Remains Crucial for Toluene Consumption

Blending toluene into gasoline is the second largest application for toluene globally. Toluene blended fuels provide higher octane ratings allowing for more efficient combustion in vehicle engines. With stricter fuel efficiency and emission standards, gasoline specifications continue to evolve necessitating higher octane blending components like toluene.

In key gasoline markets of the U.S., Europe and China, toluene demand from gasoline blending is projected to increase at 1-2% annually through 2025. Further impetus is expected from higher vehicle parc particularly in developing countries supported by strong economic growth. Recovery in fuel demand following easing of pandemic restrictions will also aid short-term blending volumes in 2021.

Supply landscape remains balanced

On the supply side, toluene is predominantly sourced as a byproduct during gasoline processing at oil refineries. With adequate global crude distillation capacities, integrated refiners have structural advantage in supplying toluene.
Toluene producer margins have also remained relatively healthy compared to other aromatics like benzene and xylenes providing incentives for capacity additions.

Key suppliers include Reliance Industries and IOCL in Asia, ExxonMobil and Shell in Europe and Flint Hills Resources in North America and Mexico. Significant new grassroot capacities are planned in China, Iran, India and Mexico through 2023 which will balance any demand growth over the forecast period.

Moreover, flexibility to switch feedstocks between naphtha and natural gas based routes provides supply resilience. Toluene trade is also well established internationally further easing regional supply-demand imbalances. Therefore, oversupply risks to pricing appear limited over the medium term.


Uncertainties from the evolving pandemic situation, raw material price volatility and macroeconomic headwinds could impact near-term demand recovery and pricing. On the supply side, ample refinery capacities and new additions ensure an equilibrium.

Overall, barring any major unforeseen disruptions, the toluene supply-demand balance is expected to remain favorable through 2026. Growth will be underpinned by robust long-term fundamentals from petrochemical consumption despite pockets of weakness in 2020-21.

 

In market dynamics in the global toluene industry are influenced by factors such as supply-demand dynamics, raw material availability, regulatory policies, and technological advancements. Fluctuations in crude oil prices, which directly impact the cost of toluene production, often drive market volatility and strategic decision-making among industry participants.

 

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About Author:

Ravina Pandya, Content Writer, has a strong foothold in the market research industry. She specializes in writing well-researched articles from different industries, including food and beverages, information and technology, healthcare, chemical and materials, etc. (https://www.linkedin.com/in/ravina-pandya-1a3984191)