China’s burgeoning supply of toluene, a petrochemical used as a raw material in the production of benzene and xylenes in the toluene disproportionation process, gasoline blending, and the manufacture of paints and solvents, has changed Asia’s toluene market landscape in recent years.

Once a major net importer of toluene, importing about 67,700 metric tons in 2022, the country has gradually decreased its imports over the past few years as its domestic supply increased significantly.

The rise in Chinese domestic supply has kept local toluene prices below imported costs and reduced the demand for imports. At the same time, China has increasingly turned to exporting its excess toluene to maintain local supply and demand balance.

In 2024, China’s exports of toluene reached about 552,300 mt, up 8.7% year on year, while imports fell by 38% over the same period to 33,900 mt, an industry source said.

The majority of China’s toluene exports goes to Singapore (28%) for gasoline blending; Taiwan, China (17%); and South Korea (13%) for running TDP process, the industry source added.

Meanwhile, China continued to import a small volume of toluene cargoes mainly from South Korea (56%), Philippines (24%) and Japan (17%), according to the source. However, the volume of imports is expected to further decrease in 2025 amid the projected startup of several new Chinese toluene plants, which will further add to overcapacity in the market.

According to Chemical Market Analytics (CMA) by OPIS, China’s toluene supply is expected to reach 28.357 million mt in 2025. There are several new plant startups being planned in 2025 and should all these plants come online as planned, the additions to the burgeoning supply in the local market will see China pushing to export these cargoes.

On the other hand, downstream demand for toluene in China is expected to remain stable in 2025. Toluene in China is mostly used in gasoline blending, TDP, the paints and solvents industry, and the toluene diisocyanate (TDI) process.

Pockets of increased demand may be seen as China enters the traditional gasoline blending season from March to May, when toluene demand may peak. Meanwhile, firm TDP economics may continue to support toluene demand in 2025 as healthy margins encourage producers to run high TDP rates, an industry source added.

Benzene-toluene spreads remained relatively stable at 975 yuan ($135.96)/mt on Feb. 28, up 6.56% from 915 yuan/mt year on year, according to OPIS data. Average benzene-toluene spreads year to date on Feb. 28 stood at 1,034 yuan/mt, OPIS data showed.

Supply and demand imbalances in the Chinese market will continue to grow as it adds new toluene capacity in 2026 amid limited growth in downstream demand sectors. An estimated 523,000 mt/year of toluene capacity are expected to be added in 2026 and this will further exacerbate overcapacity in the Chinese market, pushing it to increase exports and switch to becoming a key exporter of toluene in Asia.

As the growth in Chinese toluene exports increase significantly and in turn cementing China’s position as one of the leading exporters of toluene in Asia, a paradigm shift in the Asia pricing index to a FOB China toluene price index would address these changing market dynamics, an industry source said.