Tight supply supports uptrend in Asia MEK prices

By Angeline Soh

SINGAPORE (ICIS)–Spot methyl ethyl ketone (MEK) prices in Asia may continue rising this month on the back of tight regional supply despite the year-end lull in demand, industry sources said on Thursday.

On 6 December, MEK was assessed at $1,330-1,350/tonne (€971-986/tonne) CFR (cost and freight) NE (northeast) Asia and at $1,340-1,360/tonne CFR SE (southeast) Asia, up by $110-150/tonne from 19 July, when the price uptrend started, according to ICIS data.

Major producers in Asia have reduced production and/or exports of MEK during the fourth quarter because of a shortage in feedstock butane (C4).

Key Japanese producer Maruzen Petrochemical has been operating its 170,000 tonne/year plant in Chiba at 70% of capacity since September.

Another Japanese producer Idemitsu Kosan ran its 40,000 tonne/year facility at Tokuyama in Yamaguchi prefecture at 55% of capacity from September to November and had to stop exporting material.

In end-November, the plant’s run rate was increased to 80% but the company has not resumed exports given healthy domestic demand in Japan. It is unclear when will the company start shipping out material again.

A separate MEK facility in Japan shut operations from mid-September to October to conduct maintenance at its tanks and berths, market sources said.

“We believe that prices will continue to rise because the supply will still be tight… The three major producers in Japan have scheduled for turnarounds next year,” a northeast Asian producer said.

These are Idemitsu Kosan, Maruzen Petrochemical and Tonen Chemical, but details on maintenance schedules in 2014 are not yet clear.

In China, local MEK producers have been focusing on catering to the more buoyant domestic market, where prices are also being propelled higher by tight supply.

Qingdao Siyuan Chemical reduced the run rate at its 80,000 tonne/year MEK unit in Shandong province to 80-90% from 100% previously, as supply of raw material to the plant was affected following the explosion at an oil pipeline in Qingdao on 22 November, according to a company source.

The production cut was implemented in late November, according to market sources.

No date was given on when the MEK unit can resume full run rates.

Qingdao Siyuan Chemical is a subsidiary of Qixiang Petrochemical Industry Group.

“I think China is unlikely to export until Q2 [second quarter] in 2014, based on its current domestic demand… Import prices will continue to be firm in Q1 [the first quarter],” a trader said.

In Taiwan, Tasco Chemical Corp has halted spot MEK exports since October, a company source said, adding that this was done to cater to increased requirements from contract customers.

Its 60,000 tonne/year plant in Kaohsiung has been running at full capacity, the company source said, contrary to what market players are saying – that the plant may be running at reduced capacity on feedstock shortage.

Tasco Chemical is the sole MEK producer in Taiwan.

Hopes for MEK price stability hinge on a new 40,000 tonne/year plant in China that is due to start commercial operations by the end of the month, market sources said.

The plant, which is jointly owned by South Korea’s Isu Chemical and China-based Dong Ming Petrochemical, is expected to export around 60% of its output to South Korea, with the remainder to be sold in the Chinese domestic market.

Details as to when MEK exports from the plant can begin were not immediately available.

“Even as the joint venture begins exports, the buyers would need to ascertain the product quality. If [the quality] unsatisfactory, the prices of other MEK cargoes will still continue to be high,” a southeast Asian trader said.

($1 = €0.73)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections