China MTBE market outlook dampened by higher imports

SINGAPORE (ICIS)–China’s methyl tertiary butyl ether (MTBE) market will soon be weighed by higher than expected imports that are scheduled to arrive by the first half of August, market participants said on Wednesday.

Spot prices on a CFR (cost & freight) China basis were at $521-523/tonne at the close of business on 26 July, ICIS data showed.

CFR China prices have remained rangebound at $520-535/tonne over the past two weeks, despite the losses seen in MTBE and RON92 gasoline FOB Singapore prices, they said. FOB (free on board) Singapore prices on the other hand have fallen by around 15% since the first week of July, according to ICIS data.

CFR China prices received some form of stability because of strong import interest, a tight domestic supply until early August and firm ex-tank prices in most parts of China, according to market sources.

Bids from major importers in both south and east China have been holding firm at $500-530/tonne CFR China for prompt or first-half August loading shipments since the first week of July despite the fluctuations in upstream crude prices, market participants said.

Yuan-denominated prices, on the other hand, have either recorded limited movements or showed slight gains.

Lower supply availability in the domestic market up to second-half August because of scheduled plant maintenances – especially in the Shandong region – further strengthened import demand and buoyed prices.

At least three MTBE units have been shut since the end-June/early July period and are expected to stay shut until first-half August.

Shandong Yuhuang Chemical’s 500,000 tonne/year unit has been shut since 20 June for at least 40 days of scheduled maintenance, while Liaoning Jiahe Fine Arts’ 180,000 tonne/year plant has been shut since early June and will remain shut till end of July, market players said.

Separately, De Paul Co’s 300,000 tonne/year unit in east China will stay shut until the first half of August.

Only Panjin Heyun’s 200,000 tonne/year unit has restarted in the week ended 25 July and is running at 70-80%.

However, market participants said that the recent stability in yuan-denominated prices could result in a potential backlash.

The stability seen in  yuan-denominated prices and decrease in FOB Singapore prices have opened up the arbitrage gap for imports into China, encouraging higher import quantities for August. This may potentially lead to a rise in inventory levels starting August, they said.

In addition to southeast Asia-origin cargoes, the availability of Middle Eastern cargoes and Taiwan-origin cargoes to China have also risen.

Market players are expecting a total of 25,000-28,000 tonnes of material, loading mainly from southeast Asia, to arrive in China by the middle of August.

“We are taking on a cautious stance for now, because August import volumes are likely to shoot up, given that the arbitrage has not been opened for close to two months,” a south China-based importer said.

While market players are betting on the gasoline blending season to drive demand for MTBE in August, it remains to be seen whether this situation could transpire because of ample gasoline stockpiles.

“There is still a lot of gasoline coming from the refineries and they are not cutting operating rates yet…only some east China refineries will cut run rates in second-half August,” a northeast China-based producer said.

Furthermore, most import buyers for the August cargoes have been traders. This means that the cargoes will eventually be available in local ex-tank markets for sale, inside of direct consumption, market participants said.

Focus article by Trixie Yap

Picture (top): Around 95% of MTBE produced has been used as an octane booster and as a oxygenate in gasoline. (Creativ Studio Heinemann/imageBROKER/REX/Shutterstock)