Toluene

Toluene Global Market Outlook:

• The global market is expected to grow at a CAGR of ~3 percent during 2023-2026: The toluene market is expected to be driven by a healthy demand for derivatives benzene and xylenes from the automotive and construction sectors. The global demand is anticipated to grow at a CAGR of ~3 percent

• Demand for transportation fuels to drive toluene price trend: The major application of toluene is in the production of gasoline as a transportation fuel. The demand for transportation fuels is expected to increase in the developing Asian countries, thereby impacting the growth of the toluene market

Toluene Demand Market Outlook

• Gasoline production is the major driver for toluene: Major demand for toluene is expected to come from the developing countries of Asia for transportation fuels. The demand for chemical derivative production (styrene, solvents, and benzoic acid) are expected to improve once the lockdown conditions are lifted in India. The automobile (3-4 percent growth) and construction sectors (3-4 percent growth) would be the key segments driving the demand.

Global Market Size: Toluene

• The global toluene market is expected to grow at a CAGR of 2.0 percent during 2023-2026, driven by a healthy downstream demand for derivatives benzene and xylenes for the use in the automotive, construction, and household durables sectors

• Demand for gasoline is another key driver for the toluene market

• Toluene market growth had increased by approx. 5.8 percent in 2022, due to a strong recovery in demand from construction, gasoline blending and TDI segments

Global Capacity–Demand Analysis : Toluene

• Asia to drive the toluene market in the long term: The global demand is expected to grow at a CAGR of 2–3 percent, primarily driven by a healthy, rising demand for solvents, fuel additives, and downstream derivatives benzene and xylenes in Asia. Additional 1.5-1.7 MMT capacity is expected during 2023-2026, from the Middle Eastern and Asian regions

• The global toluene market is currently tightly supplied, due to a low production of toluene in the US and a shortage of imports from Asia, due to a container shortage situation

Market Outlook

• Benzene and xylene conversion margin to drive the demand: Nearly 50 percent of toluene produced is converted into benzene and xylene for applications in the automotive, construction, and household durables sectors. Healthier margins in toluene to xylene conversion are expected to drive the demand for toluene at a CAGR of about 3 percent. An increased benzene output from the Middle East, Africa, and Asia may reduce toluene demand for conversion

• Global operating rates were in the range of 77–80 percent during 2020–2022. It is forecasted to be in the range of 80–84 percent during 2023–2026, due to limited capacity additions

• Use of toluene in gasoline and solvents production accounts for about 29 percent and 17 percent, respectively. Growth in these segments is expected to be healthy in the Asian region at CAGR of 2–4 percent

• TDI to drive toluene demand in the Asian markets: Demand from the TDI sector, which accounts for 5 percent of the total demand, is expected to grow at a CAGR of 4-5 percent, due to increased construction activities in Southeast Asia

• Pharmaceutical demand to increase in the US: Use of toluene in the production of drugs, such as penicillin G, prednisone, ciprofloxacin, and norfloxacin, is expected to grow at a CAGR of 1–3 percent

Engagement Outlook

• Spot buying is preferred in Asia: The consumers buy commercial-grade toluene available in the spot market and convert that into solvent, which can be used in FMCG applications

Porter's Analysis on Toluene (North America and EU)

Supplier Power

• Aromatics comes predominantly as a by-product in crude refining in the western markets: Production of toluene is quite low in the West as against Asia, where BTX units are set up. Toluene is mainly produced as a co-product in refinery gasoline stream. So, the industry is technically backward integrated, which results in complete control over the supply chain

Barriers to New Entrants

• Huge capital cost on the back of changing feedstock dynamics, due to the shale gas advent: Barrier for entrants is higher due to the high capital cost involved in setting up a plant. The US has shifted to gas-based setup, which puts the toluene sector at a disadvantage

Intensity of Rivalry

• Integrated facilities and import dependency: Comparatively, consolidated industry with complete control over the value chain starting from crude oil or naphtha

• However, availability of material from Asia adds to the supply options for buyers, thus increasing the rivalry among domestic producers for the market share

Threat of Substitutes

• There are no substitutes available for toluene in the market

Buyer Power

• Buying power is low for small volume buyer (personal care product manufacturers): Mostly, toluene producers are forward integrated with production of gasoline and other fuels from crude oil

• The demand for toluene in chemical derivative production remains considerably lower when compared to fuel production and so, the buyer power is very low