Rail Crossings Between Texas and Mexico Raises Concern for the US Toluene Manufacturers

Houston (USA)- Toluene prices in the US market dipped in the middle of December amidst the weak demand for the commodity in the domestic market and tight supplies. Major facets impacting the final prices of Toluene are inclusive of the production cost and the demand outlook for the commodity from the end-use manufacturing units in the domestic market. Benzene (feedstock) prices in the US market also continued to decline in the domestic market as the crude oil and naphtha prices were under control and retailers had to decrease the prices of Toluene and its derivatives. Toluene price quotations in the US market were witnessed at USD 990 per MT, FOB Texas on the week ending December 15th.

The closure of railway crossings by the federal government in two Texas border towns—Eagle Pass and El Paso—has raised concerns about potential impacts on cross-border trade and American consumers. Customs and Border Protection announced a temporary halt to railroad operations without specifying the duration of the pause. Union Pacific and BNSF, the two affected carriers, usually facilitate the movement of 24 trains daily, transporting various goods such as agricultural products, automotive parts, finished vehicles, chemicals, and other consumer goods, as reported by the Association of American Railroads inclusive of Toluene.

The temporary cessation of railway operations at the international crossings connecting Texas and Mexico could have a significant impact on the production of Toluene, with potential repercussions extending to the U.S. supply chain. While trucks could serve as an alternative to trains, the logistical challenges of moving Toluene and other commodities at such a scale on roads are apparent. Additionally, crude prices maintained their gains after the U.S. Federal Reserve announced it would keep interest rates steady as anticipated, signaling a future reduction in borrowing costs in 2024.

The sentiment in the oil market took a notably bearish turn due to the simultaneous strength in non-OPEC+ supplies and a slowdown in global oil demand growth. Despite the extension of OPEC+ output cuts through the first quarter of 2024, oil prices failed to gain support. The substantial increase in supply from the United States, Brazil, and Guyana, coupled with a significant rise in Iranian oil production and a decrease in demand, led some OPEC+ members to announce more extensive cuts through the first quarter of 2024 to prevent a potential inventory build. As per ChemAnanalyst, the Toluene prices in the US market is anticipated to decline further in the upcoming weeks as the destocking behavior of the retailers surpasses the available stockpile. Toluene demand may continue to remain subtle from personal care and solvent sectors.