FocusAsia MTBE may weaken on poor Q4 demand, volatile crude

27 September 2011 06:59  [Source: ICIS news]

MTBE is an octane booster in gasoline.By Felicia Loo

SINGAPORE (ICIS)--Asia’s MTBE prices may drift lower in the last quarter of the year as a jittery global economy, accompanied by volatile crude values, will likely dampen demand for the octane booster in gasoline, traders said on Tuesday.

Spot MTBE prices were at $1,069-1,071/tonne (€791-793/tonne) FOB (free on board) Singapore on Monday, down by an average of $45/tonne from $1,104-1,126/tonne in the week ended 23 September, ICIS data showed.

“The [MTBE] market seems to be depressed because of crude,” said a trader.

NYMEX WTI crude futures closed the week ending 23 September on an extremely weak note in response to the global economic slowdown and deteriorating market sentiment.

A slew of dismal economic data from Europe, the US and China sent global equities markets tumbling and crude prices falling by about $5/bbl on 22 September. Investors fled to the safety of bonds that significantly strengthened the US dollar.

However, crude futures bounced higher on Tuesday, buoyed by news that the European Central Bank may work towards implementing more aggressive measures to remedy the region’s mounting debt crisis.

At 01:57 GMT, November Brent crude on London’s ICE futures exchange was trading at $105.32/bbl, up by $1.38/bbl from the previous close. November NYMEX light sweet crude futures (WTI) were at $81.67/bbl, up by $1.43/bbl from the previous close.

In the Asian MTBE market, spot prices are weak but tight supply is currently holding the premiums up.

A couple of deals changed hands early last week at a premium of $30/tonne to market quotes on a delivered basis. The two 2,000-tonne cargoes of Middle Eastern material were for delivery in the first half of October, market sources said.

Plant maintenance and firm regional demand are sapping supply availabilities. 

SABIC plans to shut its 700,000 tonne/year MTBE plant at Al-Jubail in Saudi Arabia for around 30 days in October. The company had previously shut the plant from February to March this year.

Trading was brisk in China in days ahead of the October Golden Week holidays. China will observe its National Day for a full week on 1-7 October.

A 2,000-tonne cargo was heard done at $1,210/tonne CFR China for first-half October delivery, with the material hailing from Thailand, traders said.

Fresh buying indications for Form E material rose to around $1,220/tonne CFR China, although this could not be confirmed. The buy-sell ideas for non-southeast Asian material were between $1,150/tonne and $1,170/tonne CFR China, traders added.

However, Chinese companies only shop for cargoes on a need-to basis, and showed more interest in smaller parcels of southeast Asian material.

Given expectations of weaker demand in the fourth quarter, in line with the slowing down of the global economy, MTBE buyers in China do not see the incentive in buying in big volumes or to stockpile for the major public holidays.

The trend of China buying on a need-to basis would persist even ahead of the Lunar New Year that will take place in early 2012, traders said.

“It is not likely for Chinese buyers to stockpile cargoes for the Lunar New Year. They will buy (MTBE) when they need to,” said a  second trader.

In the week ended 23 September, domestic MTBE prices in east China rose gradually from yuan (CNY) 9,200/tonne at the start of the week to around CNY9,350-9,400/tonne. In south China, selling ideas increased to CNY9,600-9,700/tonne following a handful of trades at around CNY9,500/tonne in the same week.

China's consumption of gasoline, in which MTBE is used as an octane booster, is set to grow at a modest rate of 5-6% this year to 75.5m tonnes, or around 1.51m bbl/day, because of higher car sales and ownership recorded last year.

The country sold 1.38m vehicles in August, up 4.15% year on year, with sales expected to keep growing at a moderate pace in the next few months, according to the China Association of Automobile Manufacturers (CAAM) said. Passenger car sales rose 7.3% year on year to 1.10m units, CAAM data showed.

In the January-August period of this year, China sold 11.98m vehicles, up 3.3% from the same period in 2010, the data showed. Total passenger car sales rose 6.05% year on year to 9.22m units during the eight-month period, according to the data.

($1 = €0.74)

Additional reporting by Hedy Dong in Shanghai

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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