Chemical profile: Asian MTBE

17 January 2013 19:50  [Source: ICB]

USES
Around 95% of methyl tertiary butyl ether (MTBE) produced is used as an octane ­booster and as an oxygenate in gasoline. One of its major advantages is its good properties for blending and for increasing the octane levels of lead-free gasoline. MTBE can be employed in the petrochemicals industry to manufacture pure isobutene from C4 butane streams by reversing its formation reaction. It is a good solvent, used as a laboratory reagent to extract semi-volatile organic compounds and as a pharmaceutical agent to ­dissolve gallstones.

SUPPLY/DEMAND
MTBE supply in Asia was largely on the longer side in most part of 2012. However, supply tightened when Asian cracker operating rates were reduced in the third quarter because of poor margins in downstream markets. Also, a reduction in Middle East spot material in the third quarter - as material was diverted to more lucrative markets further west in Europe and Latin America - curtailed spot availability in Asia further.

However, demand dwindled towards the last quarter of the year because of a driving season lull. Harsh weather conditions in most parts of northeast Asian countries dampened already subdued demand. Consequently, spot appetite for MTBE in gasoline blending decreased significantly.

Besides gasoline blenders facing squeezed margins on the back of high MTBE prices, downstream MMA makers in Asia faced eroded margins. The high prices also led gasoline blenders to use alternative blending liquids such as cheaper toluene.

In November, news of a possible consumption tax to be levied on gasoline in China, with effect from 1 January 2013, exacerbated the bearish market outlook. The tax extends from producers to sellers, stating that if a seller of the products cannot prove that the tax is already paid, the seller will be the ­taxpayer.

PRICING
MTBE prices plunged to a 17-month low in June 2012 to land at $923 (€695)/tonne FOB Singapore - a consequence of the dive in crude futures, gasoline and naphtha prices.

Prices immediately rebounded to hit a four-month high at $1,183/tonne FOB ­Singapore in just two months, following a recovery seen in energy markets, together with improved downstream demand ahead of the driving period in the third quarter. The MTBE factor against gasoline, a measure of the MTBE price relative to that of gasoline, was volatile throughout the year.

TECHNOLOGY
The reaction of isobutene with methanol over a catalyst bed produces MTBE. The ­reaction can take place in either a ­liquid-phase reactor or a mixed gas-liquid-phase reactor that contains an acidic ion ­exchange resin.

The reaction mixture is distilled to produce high purity MTBE. It is also obtained as a ­byproduct from the propylene oxide (PO) process where tert-butyl alcohol is dehydra­ted to isobutene.

OUTLOOK
Prices of MTBE in China are expected to drop in the first quarter of 2013 as a result of weak demand and subdued trade amid a long holiday period. The new rule on consumption tax has also contributed to the bearish sentiment.

Meanwhile, Chinese MTBE producers are actively applying for tax exemptions, but it is unknown if these will receive approval from the tax regulators.

Spot demand from Taiwan will fall from 2013, as the largest consumer - CPC - will most likely skip spot purchases, after the start-up of its new residual fluid catalytic cracker (RFCC) in last November.

In southeast Asia, the approval of use of the more attractively-priced ethanol as a blending solvent in gasoline in a few countries is expected to reduce spot demand in the region.


Author: Sheau Ling Ong



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