06 March 2013 05:18 [Source: ICIS news]
By Trisha Huang
MELBOURNE (ICIS)--Spot methyl isobutyl ketone (MIBK) prices in Asia may continue to fall because of rising supply and soft downstream demand, market sources said on Wednesday.
Prices have fallen by 6% over the past three months to settle at an average of $1,910/tonne (€1,471/tonne) CFR (cost and freight) China for the week ended 5 March, after supply was boosted by a capacity expansion in South Korea. Prices are at the lowest level so far this year, according to ICIS.
Meanwhile, prices of feedstock acetone have gained 5.7% over the same period to average $1,155/tonne CFR China on 1 March, ICIS data showed.
High feedstock costs, however, have been overshadowed by the substantial rise in regional MIBK product availability, while operating rates in the downstream solvents, coating and rubber chemicals additive sectors in China are low post-Lunar New Year.
Almost three weeks after business activity resumed in China, downstream buying activity remained weaker than expected, according to local MIBK producers and traders of imported MIBK.
The Lunar New Year holiday in China fell on 9-15 February in 2013.
South Korea’s Kumho P&B Chemicals on 10 December 2012 commissioned its expanded MIBK plant in Yeosu, boosting its export volume to 1,500-2,000 tonnes a month. Kumho’s MIBK capacity was increased by 83% to 55,000 tonnes/year during its plant’s three-month shutdown that began on 1 September 2012.
In response to the substantial rise in supply, along with progressively weaker prices in the domestic market, Chinese importers’ buying sentiment for MIBK spot imports from key supply sources – including Japan, Taiwan, South Africa and the US – have been weakening since early December.
Buyers are resisting current selling indications at $1,930-1,950/tonne CFR China for MIBK of South Korean and Japanese origin.
In the domestic China market, prices of imported MIBK declined to yuan (CNY) 15,300-15,500/tonne ex-tank in eastern China during the week from CNY16,000-16,200/tonne ex-tank for the week ended 19 February, the first post-holiday working week, ICIS data showed.
Some importers said they expect prices to soon fall below CNY15,000/tonne ex-tank because the supply overhang will remain in place. Chinese MIBK producers’ discounting initiatives have contributed to hasten the MIBK price slide, the importers said.
As such, importers’ buying ideas for replacement cargoes arriving in April were capped at $1,850-1,870/tonne CFR China.
“Prices should continue to fall because we simply can’t see any support for MIBK prices,” said a Chinese MIBK importer.
“[Feedstock] acetone prices are starting to soften, and supply [of MIBK] is plentiful,” the importer said.
Acetone prices in Asia at $1,140-1,170/tonne CFR China on 1 March were down $20/tonne at the low end of the range, according to ICIS data.
Chinese MIBK makers slashed their offers in the domestic market by CNY400/tonne ($64/tonne) during the week to CNY15,000-15,400/tonne ex-works (EXW) in a bid to boost sales as their inventories mounted. The producers’ offers were at CNY15,600-16,200/tonne EXW during the week ended 19 February.
“We have little room to reduce prices because the cost of acetone has remained persistently high. But we have to stay competitive in the face of the high volume of imports,” said a Chinese MIBK producer.
At the same time, rising product availability has driven some of the excess spot imports to southern China. The consequent supply glut is causing concern among importers.
About 2,000 tonnes of spot MIBK were heard booked by traders for delivery to southern China in March, more than double the monthly consumption in that region, importers said.
“Downstream demand has been weaker than we expected,” said a second importer.
“A normal price level for MIBK should be at the CNY13,000-14,000/tonne ex-tank level. High prices are not helping demand,” the second importer said.
Even as prices succumbed to the rising volume of imports, Chinese producer Taizhou Petrochemical may restart its 20,000 tonne/year MIBK plant at Taizhou in Jiangsu province in April, sources close to the company said.
Taizhou Petrochemical’s plant has been off line since late December 2012 because supply of feedstock hydrogen was curtailed by the shutdown of its integrated 30,000 tonne/year methyl ethyl ketone (MEK) unit at the same site.
Looking further ahead, some traders in China said the MIBK price downtrend may be halted in April as operating rates in the downstream segments return to full capacity, along with reduced MIBK spot availability from Japan.
Japanese producer Mitsui Chemicals plans to switch to producing methyl isobutyl carbinol (MIBC) at its 30,000 tonne/year MIBK plant at Iwakuni-Ohtake Works in Yamaguchi prefecture for two weeks in April, which will curtail its MIBK output and export volumes for the month.
Fellow Japanese producer KH Neochem plans to shut its 15,000 tonne/year MIBK plant at Yokkachi in Mie prefecture for a 40-day turnaround between mid-March and end-April.
“The MIBK price slide should start to slow down because spot prices are coming back to a more sensible level [of around $1,800s/tonne CFR China] based on current acetone costs,” said a Chinese MIBK end-user.
($1 = €0.77 $1 = CNY6.22)
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