FocusAsia MIBK may rise on better demand, firm feedstock prices

28 August 2012 06:42  [Source: ICIS news]

By Trisha Huang

MELBOURNE (ICIS)--Spot prices of methyl isobutyl ketone (MIBK) in Asia may rise in September and October on the back of tight supply and stable-to-firm prices upstream acetone values, market sources said on Tuesday.

Supply of spot cargoes to China and southeast Asia is expected to tighten, with Japan’s Mitsui Chemicals planning to shut its 30,000 tonne/year MIBK plant at Iwakuni-Ohtake Works in Yamaguchi prefecture in early October for annual maintenance lasting six to seven weeks.

The turnaround will overlap with a three-and-a-half month shutdown planned by South Korea’s Kumho P&B that will start on 1 September.

 “MIBK prices may rise in Asia because of the overlapping shutdowns in Japan and South Korea, however, we are bearish about the market outlook in China, at least for September,” said a Chinese importer.

An unplanned shutdown of Mitsui Chemicals’ plant in late April had triggered a surge in MIBK prices to a record average of $2,190/tonne (€1,752/tonne) CFR (cost and freight) China for the two weeks ended 22 May, according to data compiled by ICIS.

Prices subsequently crashed by 22% to $1,705/tonne CFR China by the week ended 10 July, as high costs prompted end-users in the solvents and rubber chemicals sectors to either seek out lower-priced substitutes, like butyl acetate (butac), or slash output altogether. Prices have since rebounded to an average of $1,785/tonne CFR China for the week ended 21 August, ICIS data showed.

Of greater concern to MIBK buyers in Asia is Kumho’s planned shutdown of its 30,000 tonne/year plant at Yeosu to carry out maintenance and capacity expansion at the unit for three and a half months from 1 September.

The South Korean company has been seeking to import about 1,500-2,000 tonnes of MIBK a month to meet an anticipated supply shortfall between September and December.

“Kumho’s intention to purchase spot supplies from overseas producers, together with the recent increases in naphtha and therefore propylene costs, could drive up MIBK prices in the region,” a trader said.

Weekly naphtha prices have risen 14% for the four weeks ended 24 August to $967.25/tonne CFR Japan, according to ICIS data.

As such, mounting costs of naphtha derivatives propylene and benzene are expected to exert upwards pressure on the prices of acetone, the feedstock for MIBK.

Prices of propylene, for instance, have gained 5% over the same four-week period to reach $1,390/tonne CFR NE Asia for the week ended 24 August, ICIS data showed.

Producers’ offers for MIBK cargoes loading in September have strengthened to $1,830-1,850/tonne CFR China/SE Asia, compared with deals for shipment this month at $1,750-1,780/tonne CFR China/SE Asia.

In China, however, MIBK prices look set to fall in September, notwithstanding the scheduled shutdown of capacities in Japan and South Korea, as domestic demand remains weak, market sources said.

“Mitsui Chemicals supplies about 800 tonnes a month to China, and the impact on prices in China should be limited,” said the trader.

China is a net importer of MIBK. It took in about 20,000 tonnes of the material in 2011, official data showed.

Weak demand from the downstream solvents sectors means that MIBK output from local producers is adequate in meeting domestic requirements, according to producers and importers in the country.

Domestic MIBK prices in China declined to about yuan (CNY) 14,300-14,500/tonne ex-tank/ex-works (EXW) this week, from CNY15,500/tonne ex-tank/EXW in early August, based on information collected by ICIS.

Local pricing may fall below CNY14,000/tonne ex-tank/EXW by the second half of September, as China’s week-long National Day holiday from 1 October will further curb business and manufacturing activity, said another Chinese importer.

“Demand from solvents end-users has weakened substantially,” the importer said. “We have been getting fewer buying enquiries in recent weeks.”

Prices in China started to fall from early August after the restart of two local MIBK plants that were shut during July eased the earlier supply concerns, in addition to slow demand from the downstream solvents sector.

China’s Zhenjiang LCY General Chemical on 4-5 August restarted its 24,000 tonne/year MIBK plant at Zhenjiang in Jiangsu province after shutting the plant on the weekend of 7-8 July because of local power restrictions.

Separately, Jilin Petrochemical is running its 15,000 tonne/year MIBK plant at full operating rate following a restart on 10 August. The plant was brought off line on 24 July to undergo repairs to the unit’s reactor.

Demand from the coating sector in China has weakened in recent weeks, driven by slowing manufacturing activity in the housing construction and shipbuilding industries, said local producers and importers.

“MIBK producers in China still have reasonable margins, which means they will continue to run their plants at full operating rates, and that will adequately meet demand in the local market,” the first Chinese importer said.

($1 = €0.80 / $1 = CNY6.36)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections
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By: Trisha Huang

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