UpdateChina MTBE at record high on very tight supply, firm demand

13 April 2011 11:11  [Source: ICIS news]

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By Felicia Loo and Hedy Dong

SINGAPORE/SHANGHAI (ICIS)--China’s prices of methyl tertiary butyl ether (MTBE) surged to an all-time peak on Wednesday, bolstered by razor-thin supply and strong domestic blending demand ahead of the summer holidays, market participants said.

Prices were also tracking robust global crude futures, with London Brent crude oil above $121/bbl (€83/bbl). Lofty European MTBE prices also triggered a rally in Asian prices, they added.

Domestic MTBE prices rose to yuan (CNY) 9,600-9,800/tonne ($1,468-1,498/tonne) on Wednesday, with fresh offers at CNY10,000/tonne, they said.

 “Supplies are very tight because there are hardly any imports,” one market player said.

Despite Beijing’s recent move to raise retail gasoline and diesel prices, MTBE prices remained lower compared with international levels. The lag in prices had constricted imports, players said.

Like the US, top energy user China enjoys the July to August holidays, when hundreds of thousands of motorists head to the roads, guzzling more gasoline as a result, they added.

In the week ended 8 April, prices of the octane booster were assessed up by $80-90/tonne to $1,190-1,210/tonne FOB (free on board) Singapore versus $1,170-1,250/tonne CFR (cost and freight) China, ICIS data showed.

Usually, the upper end of the price range reflects the southeast Asian cargoes, which are tax-free and are priced higher, traders said.

Meanwhile, MTBE FOB Singapore prices remained very strong, partly tracking the strength in Europe, where supply was tight and bullish demand prevailed in addition to limited Middle East imports, they added.

Europe MTBE prices surged by $150-177/tonne to $1,400-1,432/tonne FOB Amsterdam Rotterdam in the week ended 8 April, ICIS data showed.

On April 7, China lifted retail gasoline and diesel by CNY500/tonne and CNY400/tonne, respectively. The national average pump prices of 90-Ron gasoline  rose by 5.63% to CNY9,380/tonne and zero pour point diesel was up by 4.9% to CNY8,530/tonne, both at historical highs, said C1 Energy, an ICIS service in China.

The 22-day moving average price of a basket of international crude oil – Brent, Dubai and Cinta – which Beijing tracks to see whether fuel price adjustments are necessary, had gained over 14% until 5 April, according to C1 Energy. This was far above the 4% that is required for adjustments.

The National Development and Reform Commission (NDRC) usually delays the adjustment for 20 days and is more likely to do so now as it tries to stabilise prices against inflation in China this year, industry sources said.

($1 = €0. 69 / $1 = CNY6.54)

Additional reporting by Ross Yeo

For more on MTBE, visit ICIS chemical intelligence

By: Felicia Loo

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