Analysis of the Toluene Market Situation.

Toluene is a basic organic chemical raw material. It is mainly used in the production of various chemical products such as benzoic acid, sodium benzoate, beazyl chloride, nitrotoluene and cresol. It is also used as raw material of caprolactam and as solvent in pesticide and paint sectors.

China has more than 60 toluene producers with a total capacity of 550 000 - 600 000 t/a. They are distributed in the petrochemical, metallurgical and chemical systems. The capacity in the petrochemical system is the greatest. Major producers include Yanshan Petrochemical Corporation, Jilin Chemical Industrial Corporation, Daqing Petrochemical Corporation, Gaoqiao Petrochemical Corporation, Zhenhai Refining & Chemical Industrial Corporation, Anshan Iron & Steel Corporation, Benxi Iron & Steel Corporation and Baotou Iron & Steel Corporation. The total output was 505 400 tons in 1999. SINOPEC producers include Yanshan Petrochemical Corporation, Shijiazhuang Refinery, Jinling Petrochemical Corporation, Zhenhai Refining & Chemical Industrial Corporation, Jiujiang Petrochemical General Plant, Qilu Petrochemical Corporation, Baling Petrochemical Corporation, Guangzhou Petrochemical General Plant and Maoming Petrochemical Corporation. Their capacity was 357 500 t/a at the end of 1999 and the actual output was 291 300 tons, a rise of 7.06% over the same period of last year.

The output of toluene has made a great increase in the recent years, the average annual growth rate being more than 15%. A group of aromatics units will be completed during the Ninth Five-year Plan period. The capacity of toluene will therefore have a further expansion. It is expected that the capacity will reach over 700 000 t/a in 2000.

The consumption structure of toluene in China in the recent years is roughly 20% for pesticides, 20% for nitrotoluene and o-toluidine, 28% for coatings and dyestuffs, 10% for national defense, 4% for synthetic materials, 4% for the pharmaceutical industry, 5% for the light industry and 9% for other sectors.

The consumption of toluene in the chemical industry is the greatest, accounting for more than 75% of the total. The production and marketing situation of chemical products produces a direct impact on the toluene market trend. The chemical market is extremely soft in the recent years and a majority of chemical products have a slack sale. Most products directly related to toluene such as nitrotoluene, o-toluidine, benzoic acid, toluene chloride, toluene p-sulfonic acid and cresol are in short demand in the domestic market. The demand increase of toluene isitherefore restricted. With the development of sectors of household electric appliances, automobiles, passenger buses, instruments, furniture and building decoration, the demand of polyurethane plastics is on the increase. Nevertheless, there is little production of raw material tolylene diisocyanate in China and great quantities have to be imported from abroad. A group of large tolylene diisocyanate units have been constructed or are under construction and t he capacity will be expanded to around 200 000 t/a. The demand of toluene will therefore have a considerable increase.

It is expected that the output increase of related products will promote the demand of toluene this year. Besides, as China plans to make a big margin increase of the input in major infrastructure projects, the expansion of construction work in railways, highways and power generation and the consumption increase of explosive materials will also promote the demand of toluene. The demand of toluene is expected to reach 650 000 - 700 000 tons this year. In spite of a considerable expansion of the capacity in the recent years, there is still a great gap compared with the increasing social demand and the supply shortage has to be bridged by imports. By contrast, toluene resources are abundant in the international market. Some foreign toluene producers sell their products at a reduced price to seize overseas markets. A lot of low-price toluene has come to the Chinese market, especially in the recent two years. The import amount in these years is in most cases equal to or more than the domestic output. Take 1999 for example, the import amount was 495 400 tons and the excessive resources caused demand shortage and falling price. We can say that import is a major factor for the domestic toluene market. The domestic toluene market is sometimes brisk and sometimes soft in the recent years and the price has also kept fluctuating. The overall situation is that due to the great import amount toluene has been in short demand and the price has been kept on a low side. In spite of a considerable gap with the domestic output, the shortage will be bridged by imports. The supply and demand will be basically balanced and the market will mostly be stable this year.