SINGAPORE (ICIS)--Asia’s methyl ethyl ketone (MEK) market is bearish in the near term on falling Chinese domestic prices amid tumbling crude values.Coatings factory in Zhuhai, Guangdong province, China. MEK’s main application is as a low-boiling solvent, with half of global demand coming from the paints and coatings industry. (Photo by Vincent Yu/AP/REX/Shutterstock)
Offers for MEK this week were at around $1,100/tonne CFR (cost & freight) SE (southeast) Asia for Chinese material, and at about $1,150/tonne CFR SE Asia for cargoes of other northeast Asian origin.
On 16 November, regional MEK prices were assessed at $1,120-1,150/tonne CFR SE Asia, down 4.2% from the previous week, according to ICIS data.
Prices had generally been on an uptrend before last week’s slump that was triggered by plunging crude prices.
In China, domestic ex-tank prices continued to fall and were at around yuan (CNY) 7,400/tonne in the eastern region and at CNY7,600/tonne in the southern region on 21 November.
From 9-16 November, east China prices have slumped 11.2%, while south China prices plunged a steeper 14.6%.
“Local buying is still hand-to-mouth although supply is balanced-to-tight,” said a Chinese trader.
A number of market players preferred to stay on the sidelines amid falling offers.
Most of the northeast Asian suppliers were reluctant to lower their offers amid tight supply due to plant troubles which were only resolved recently.
A 500-tonne cargo was concluded at $1,180/tonne CFR SE Asia late last week but was not taken into consideration in the ICIS assessment.
The deal price was not reflective of current market fundamentals, with offers quoted at much lower prices.
Counterbids are currently at about $1,100/tonne CFR SE Asia for non-Chinese material.
Market players in southeast Asia usually prefer to buy from their regular suppliers in northeast Asia if possible, unless Chinese material is cheaper by $50-100/tonne.
Buyers have sufficient inventories for now, and were not in a hurry to procure additional material, preferring to monitor the market situation before committing to any decisions.
Market sentiment in the upstream naphtha market in Asia was also bearish in the near term due to long supply amid an influx of cargoes from Europe.
Crude values were also lower on concerns over global economic growth and persistent oversupply.
At midday, crude prices were trading higher, with Brent up 75 cents at $63.28/bbl, and WTI up 68 cents at $53.11/bbl, rebounding from a 6% plunge overnight.
Market players in the MEK market were cautious, trying to minimize their risks by staying on the sidelines for now.
“The outlook is very cloudy now. But if prices keep falling, producers will face increasing production costs, and at the end of the day, producers may decrease their production,” said a Chinese trader.
Focus article by Yuanlin Koh