Asia MEK seen firm on tight supply, IPA flat to mixed

13 January 2014 03:16 Source:ICIS News

By Angeline Soh

SINGAPORE (ICIS)--Asia methyl ethyl ketone (MEK) is expected to retain its uptrend in the first quarter of 2014 due to tight supply, while sentiment for isopropanol (IPA) prices is mixed - remaining low like in 2013 or even weakening further, market sources said on Monday.

Demand though for both solvents - mainly used for industrial paints and coatings, printing inks and in finished goods such as furniture and cars – is expected to be stable, they added.

In late December, spot MEK was trading at $1,350-1,370/tonne CFR (cost & freight) northeast (NE) Asia and $1,360-1,385/tonne CFR southeast (SE) Asia after having steadily moved up from July 2013, when spot MEK was at $1,180-1,200/tonne CFR northeast (NE) Asia and $1,210-1,240/tonne CFR southeast (SE) Asia.

MEK’s robust demand is expected to continue into the first quarter of 2014 with the exception of the January where the markets in China close for the week-long Lunar New Year celebrations starting from 31 January, sources said.

MEK prices were supported by firmer naphtha feedstock values, as well as reduced production levels.

China’s Qingdao Siyuan Chemical has reduced the run rate at its 80,000 tonne/year MEK unit in Shandong province to 80-90% from 100% in the past, due largely because supply of raw material at the plant was affected following the explosion at an oil pipeline in Qingdao on 22 November.

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

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

Major producers in Asia outside of China have not resumed their full production level and/or exports going into 2014, 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 2013.

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. 

Buyers are optimistic that there could be some relief from the tight supply when the joint venture between South Korea's Isu Chemical and China-based Dong Ming Petrochemical starts exports.

The new 40,000 tonne/year plant in China that is slated to start exports in 2014, although no definite date was given. 60% of the output is expected to be exported to South Korea, with the remainder to be sold in the Chinese domestic market.

Meanwhile in the IPA market – where prices fell steadily from January to April and have been mostly flat until December -  market participants expect prices to be determined by the import demand and domestic production in China.

In late December, spot IPA was trading at $1,220-1,300/tonne CFR NE Asia for non-dutiable shipments and $1,220-1,250/tonne CFR NE Asia for dutiable shipments. In southeast Asia, IPA prices were at $1,290-1,300/tonne CFR SE Asia.

Imports to China totalled 64,496 tonnes in the first nine months of 2013, up from the 61,000 tonnes from the same period in 2012.

Market participants said the slight growth was propelled by the increased feedstock prices in China in August and September, resulting in an increase in demand.

Despite the slight growth, import demand has been steadily declining since 2010.

Official statistics showed that imports in 2012 had contracted by 10.23% compared with the same period in 2011. The imports in 2011 had also contracted by 15.25% from the same period in 2010.

The rise in the domestic IPA production has led to the decreased reliance on imports.

Yancheng Super Chemical and Taiwan’s Chang Chun Plastics will add a total of 180,000 tonnes to China’s annual IPA production capability, which is at an estimated 340,000 tonnes/year currently.

“The growth in the IPA production is more than demand. Import demand, especially, will continue to decline in 2014. The domestic producers in China will be able to cater to much of the local and regional demands,” a southeast Asian buyer said.

By Angeline Soh