Price and market trends: China MTBE buyers shun imports as prices spike on strong crude

29 November 2012 18:47  [Source: ICB]

Importers of methyl tertiary butyl ether (MTBE) in China have retreated from the market as prices of the product has been tracking the sharp increase in crude values, industry players say.

Spot MTBE prices surged by about $70/tonne (€55/tonne) in the week ended 21 November to $1,112/tonne FOB (free on board) Singapore, following sharp gains in upstream crude prices.

US crude had gone up by more than $2/bbl from two weeks before, while Brent was up by about $4/bbl over the same period.

"Crude has been going up these two weeks and the MTBE numbers just kept tracking it higher. It is impossible to import now," a Shanghai-based trader said.

"Up until last week, we were still receiving enquiries, but somehow it just disappeared this week," a Singapore-based trader said.

In early November, a few spot MTBE parcels were concluded when prices were hovering at the low-$1,000/tonne FOB (free on board) Singapore levels.

"Prices then were really attractive," another Shanghai-based trader said.

In China, domestic MTBE prices were at yuan (CNY) 8,900-9,000/tonne ex-tank on 21 November, down by about CNY200/tonne from the start of the month, according to ICIS C1 Energy.

Prices fell partly on panic-selling of MTBE following an announcement that a new consumption tax will be levied on certain petrochemical products from January 2013, industry sources said.

"It is just very confusing now; we have no idea whether there will be a consumption tax [on MTBE]," a third Chinese trader said.

MTBE supply in the domestic market, however, is fundamentally on the low side so prices did not weaken significantly.

Some Chinese importers took a cautious stance and backed off from the import market because of the possible consumption tax.

"It is highly likely MTBE will be imposed with this tax. That doesn't make sense for Chinese gasoline blenders," an Asian player said.

If the consumption tax is applied to MTBE, a gasoline blender will have to pay the tax twice since gasoline is subject to a consumption tax of CNY1.00/litre, industry sources said. MTBE is used to boost octane levels in gasoline.

By: Ong Sheau Ling
+65 6780 4359

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