FocusAsia MTBE plunges on weak Europe market, China demand

20 May 2011 07:00  [Source: ICIS news]

By Felicia Loo and Ross Yeo

SINGAPORE (ICIS)--Prices of methyl tertiary butyl ether (MTBE) in Asia may continue falling in the coming weeks, taking the cue from plunging prices in Europe, as demand in China for the octane booster declines, traders said on Friday.

MTBE prices on a free on board (FOB) Singapore basis are expected to slip below $1,100/tonne (€770/tonne) this week, traders said.

In the week ended 13 May, Asian MTBE prices were assessed at $1,140–1,160/tonne FOB Singapore, down about 5% week on week, according to ICIS.

In Europe, MTBE prices were quoted at $1,106–1,110/tonne FOB AR (Amsterdam-Rotterdam) on 19 May, compared with the ICIS-assessed price of $1,150–1,162/tonne FOB AR on 13 May.

European MTBE demand has waned because the reintroduction of 5% bioethanol blend (E5) gasoline had led to lower production of 98-octane gasoline in Germany.

Most German motorists continue to reject 10% bioethanol-blended gasoline (E10) – even four months after E10 was approved for sale in the country and following a high-profile information campaign, the country’s refining industry trade group said on Friday.

German drivers remain worried about the risk of engine damage. In view of the low demand for E10, Germany’s refiners will reintroduce premium gasoline with 95-octane and 5% bioethanol blend (E5), Hamburg-based trade group MWV said.

Also in Europe, the high-price environment in April had attracted imports, including supplies from swing producers in the Middle East, and this had resulted in a build in MTBE supply. Price decreases are expected to continue as supply outpaces demand, traders said.

In Asia, demand from the key China market has been curbed by wild fluctuations in global crude futures, they said.

“It’s difficult to find buyers in China. Their buying indications are low and they are adopting a wait-and-see attitude as prices are falling,” said a trader in Singapore.

In China's leading market, MTBE prices in Shandong province were quoted this week at yuan (CNY) 8,900–9,000/tonne ($1,367–1,382/tonne) ex-tank, down by 5% from last week’s levels. The grade is of 95% purity.

Towards the latter part of this week, MTBE 95% traded even lower, at CNY8,800–8,900/tonne ex-tank.

Prices for MTBE 98% were also weaker, at CNY9,000–9,200/tonne ex-tank in Shandong province, down CNY300/tonne ex-tank earlier in the week, traders said. On China's east coast, MTBE prices dropped by CNY200–300/tonne to CNY9,400–9,500/tonne ex-tank.

Chinese refiner Sinopec was said to have ceased outsourcing its blending requirements because of bloated gasoline stockpiles in the domestic market, traders said.

This further hit MTBE demand in China, where refineries are ramping up runs to boost diesel supply amid a severe power crunch, which led to higher production of gasoline.

Blending demand was also somewhat weak in Singapore, as reflected in the reforming margin between 92-ron and naphtha, which narrowed to $10.80–11.00/bbl from $12/bbl during the previous week, traders said.

Outside China, overall MTBE supply was not as tight as before. A reduction in MTBE operating rates in Taiwan was offset by the restart of an MTBE plant in Malaysia.

State-owned oil giant PETRONAS restarted its 300,000 tonne/year MTBE plant at Kuantan, in Malaysia's Pahang state, on 19 May following planned maintenance. The plant was shut from 18 April–19 May.

Taiwan's Formosa Petrochemical Corp (FPCC) has reduced operating rates at its Mailiao-based 190,000 tonne/year MTBE plant to around 75%. This follows the shutdown of its 700,000 tonne/year No 1 cracker, which is one of three naphtha crackers in the complex.

Prior to that, FPCC was running the MTBE plant at full capacity. The Formosa group may restart the No 1 cracker a month from now as a result of a fire at the Mailiao petrochemical complex on 12 May.

Additional reporting by Hedy Dong

($1 = €0.70, $1 = CNY6.51)

For more on MTBE, visit ICIS chemical intelligence
Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Felicia Loo

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