FocusChina MTBE may stabilise; buying interest low, supply tight

07 September 2012 05:08  [Source: ICIS news]

By Hedy Dong

SINGAPORE (ICIS)--Prices of methyl tertiary butyl ether (MTBE) in China are expected to be largely stable in September, as a reduction in supply coincides with low buying interest, market sources said on Friday.

Ex-terminal barge prices of MTBE in south China rose to CNY9,250-9,350/tonne ($1,459-1,475/tonne) on 6 September, up by CNY550/tonne from one month ago, according to C1 Energy, an ICIS service in China.

In east China, prices increased by CNY600/tonne over a month to CNY9,100-9,200/tonne on 6 September, the data showed.

MTBE prices have been rising since early July, gaining an average of CNY1,850/tonne on the back of firmer international crude prices, which boosted sentiment in the gasoline market.

On Friday morning, US crude is trading at close to $95/bbl, while Brent crude was nearing $113/bbl, up by about $11/bbl and $15/bbl from July, respectively.

Around 90% of MTBE in China goes into the gasoline blending market. MTBE is used as an additive to boost octane levels in gasoline.

However, high prices have sidelined market players, with buying activities restricted to those with urgent need.

Uncertainties in crude price direction could also weaken buying interest in the MTBE market. Weakening global demand and geopolitical tensions between Iran and the West are two opposing forces that dictate the movement of crude prices in the international market.

On the supply side, MTBE plants in China ran at reduced average rate of 63.8% in August, down by 0.8 percentage point from the previous month as some units were shut for maintenance, industry sources said.

The same average operating rates may apply for September because of a number of turnarounds, they said.

China produced 386,700 tonnes of MTBE in August, down by 4,800 tonnes from July, industry sources said.

Imported material, on the other hand, remained in limited supply, with August imports volume at about 15,000 tonnes, industry sources said.

Meanwhile, expectations of a yuan (CNY) 400-500/tonne hike in domestic fuel prices in mid-September will continue to lend some support to the MTBE market, industry sources said.

Under the existing pricing scheme, China would adjust gasoline and gasoil prices when the 22-day moving average of the benchmark crude prices rises or declines by at least 4%.

For the period 8 August to 5 September, the moving average of Brent, Dubai and Cinta crude has risen by 8.23 %, according to C1 data.

China last increased its domestic fuel prices on 10 August.

($1 = €0.81 / $1 = CNY6.34)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections
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By: Hedy Dong

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