FocusAsia MTBE at near 5-month peaks on Chinese demand, low supply

17 September 2010 04:16  [Source: ICIS news]

By Felicia Loo

SINGAPORE (ICIS)--Prices of methyl tertiary butyl ether (MTBE) in Asia have surged to a near five-month high, and may soar further as Chinese blenders are scrambling for imported barrels ahead of the week-long National Day holiday, market players said on Friday.

MTBE prices were quoted at near $800/tonne (€608/tonne) FOB (free on board) Singapore in the week to 17 September, the strongest since 30 April when prices were pegged at $842.50/tonne FOB Singapore, ICIS data showed.

MTBE is used as an additive to improve gasoline's octane levels.

“It’s pre-holiday demand season in China. There is a lot of demand from Chinese blenders,” said a trader in Singapore.

China, the world’s top energy user, will celebrate its week-long National Day holiday on 1-7 October. During this period, gasoline consumption in the oil-guzzling nation will peak, prompting blenders to secure MTBE imports at present.

After all, passenger car sales in China were robust, rising 18.7% from a year ago to 1.02m in August, according to a Reuters report, quoting data from China Association of Automobile Manufacturers (CAAM).

Car sales are likely to increase, as the Chinese economy grew at a yearly rate of 11.1% in the first half of this year, up 3.7 percentage points from the same period last year.

Domestic MTBE prices in China have climbed higher to yuan (CNY) 7,100-7,200/tonne ($1,055-1,070/tonne) this week, from CNY6,800-6,900/tonne a week ago, reflecting higher import needs, traders said.

Demand was outpacing supply in China, in spite of Sinopec subsidiary Yangzi Petrochemical Co having resumed production at its 90,000 tonne/year MTBE plant in Nanjing, China, on 10 September. The plant was shut for a routine maintenance on 9 August.

Chinese buying ideas edged up to $800/tonne CFR (cost and freight) China, from $770-780/tonne CFR China on the previous week, but selling indications rose to $830/tonne CFR China.

“It’s basically a sellers’ market,” one trader said.

For this week, there were no signs of MTBE imports into the Chinese port of Nantong as sellers braced for higher domestic prices, traders said.

“Singapore prices are robust. Plus supply is tight in southeast Asia,” said a trader in Shanghai.

On signs of the MTBE strength, spot premiums in Singapore oil hub marched higher to around $25/tonne to market quotes on a delivered basis, widening from $20/tonne on the previous week, traders said.

The spread between 92-RON and naphtha widened to $7-8/bbl from $6.30/bbl last week, signifying a bullish MTBE market, traders said. The rule of thumb for profitability in blending, or reforming margin, usually hovers at $5.50/bbl.

Apart from China, there was also firm demand from Taiwan. CPC Corp tendered to buy 5,000-10,000 tonnes of MTBE for delivery into Keelung or Kaohsiung during November and December. In its last tender, CPC last bought 15,000 tonnes of MTBE for delivery in September and October, at a premium of $10.00-15.00/tonne to Singapore quotes FOB.

In southeast Asia, MTBE supply was scarce. Thailand's Bangkok Synthetics Co (BST) would continue to skip exports of spot MTBE cargoes for the fourth successive month in October, compounding the thin supply situation in the region, market players said.

BST would retain the cargoes for term customers instead, as it would shut the 55,000 tonne/year MTBE plant for 17 days between late November and early December, they added.

Adding to razor-thin supply, petrochemical giant Saudi Basic Industries Corp (SABIC) had taken off line the smallest of its three MTBE plants at Al-Jubail, Saudi Arabia, since a snag in early September.

The 300,000 tonne/year MTBE plant was closed for repairs, while SABIC continued to run the two other MTBE plants at the same site, with capacities of 1m tonnes/year and 700,000/tonnes/year.

As a result, SABIC reduced its spot MTBE supply in Asia – down to six from 9-10 lots this month.

Underscoring the supply tightness, onshore stocks of naphtha, gasoline and reformate in Singapore fell 1.302m barrels in the week ended 15 September to a three-week low of 10.56m barrels, industry data showed.

But falling global crude futures would put lid to MTBE price gains, traders said.

“Crude is coming off and (MTBE) prices are simply too high now,” said a trader in Singapore.

NYMEX light sweet crude futures drifted lower on Friday at under $75/bbl – falling for a third day – as a major Canada-US crude pipeline was poised to resume flows on Friday, restoring crude exports to the US Midwest.

($1 = €0.76 ; $1 = CNY6.73)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections
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By: Felicia Loo

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