OUTLOOK ’11: Asia MTBE to ease on shrinking Chinese demand

30 December 2010 02:48  [Source: ICIS news]

Sinopec gas station. A recent drive by Chinese refineries in ramping up diesel output to ameliorate a power shortage had led to a glut in gasoline, resulting in hefty domestic stockpiles at a time of a seasonal demand slowdown. MTBE is used as an octane booster in gasoline.By Felicia Loo

SINGAPORE (ICIS)--Asia methyl tertiary butyl ether (MTBE) prices are expected to ease in the coming months, as Chinese import demand for the octane booster fizzles out, along with a weakening gasoline market, traders said.

Lower spot supply in January and February could, however, help support prices, as the world’s top MTBE producer Saudi Basic Industries Corp (SABIC) would shut some of its plants for maintenance, they added.

“The (Chinese) MTBE market is not in good shape. Stocks are ample and gasoline consumption has slowed especially during the winter months,” said a Beijing-based trader.

“It’s hard to predict the demand pattern next year [2011], but so long as pump prices remain unchanged, blending demand will be limited,” he added.

Government-controlled gasoline prices in the world’s top energy user are a signal that Chinese blenders would be reticent to import much MTBE even as motorists turn to driving more luxurious cars that require higher-octane petrol, traders said.

China last hiked retail fuel prices on 22 December.

Domestic Chinese MTBE prices are forecast to stay between yuan (CNY) 7,200-7,400/tonne ($1,088-1,118/tonne) for the next several weeks, they added.

What’s more, a recent drive by Chinese refineries in ramping up diesel output to ameliorate a power shortage had led to a glut in gasoline, resulting in hefty domestic stockpiles at a time of a seasonal demand slowdown, traders said.

Meanwhile, outside China, spot MTBE premium is expected to drop to under $20/tonne (€15/tonne) to market quotes on a delivered basis, as blending demand in the Singapore oil hub is likely to shrink further in tandem with Chinese demand.

“What’s keeping premiums strong right now is due to scarce spot supply. But that will change when [the] SABIC plants complete the maintenance,” said another trader.

Petrochemical giant SABIC will conduct turnarounds at its 1m tonne/year and 300,000 tonne/year MTBE units in Al-Jubail, Saudi Arabia, from the end of December 2010 to early February 2011. In addition to the two units, the company also runs another 700,000 tonne/year MTBE plant in Al-Jubail.

In Singapore, a low blending margin at $3.60-3.70/bbl between 97- and 92-octane kept buyers sidelined, traders said.

“People are dispassionate about blending. The outlook is no good,” said one trader.

For Outlook 2011

($1 = CNY6.66 / $1 = €0.76)

For more on methyl tertiary butyl ether visit ICIS chemical intelligence
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Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Felicia Loo

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