Asian MEK may extend gains in near term on limited spot supply

Source: ICIS News


SINGAPORE (ICIS)--Asia methyl ethyl ketone (MEK) prices may extend gains in the near term on an upcoming spate of plant turnarounds in China.

Buying indications have risen to around $985/tonne CFR northeast (NE) Asia for late March/early April shipments this week.

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“Although most buyers were not prepared to pay higher than $950/tonne CFR NE Asia, there were some importers who were willing to pay at least $30/tonne higher,” said a northeast Asian trader.

South Korean buyers, in particular, were concerned about procuring sufficient stocks to cover the expected rise in rising domestic consumption as the weather turns warmer and downstream demand in sectors like paints and coatings get stronger.

As such, some buyers were under pressure to secure cargoes at a higher price.

On 22 February, spot prices rebounded to $975/tonne CFR (cost & freight) NE Asia, up by $57.50/tonne or about 6% from the previous week.

Spot prices have been stagnating since late December at $890-895/tonne CFR NE Asia.

Chinese producers have hiked offers to $1,000/tonne CFR NE Asia, in anticipation of tightened supply and higher feedstock naphtha cost.

Spot offers from the Japanese and Taiwanese producers have yet to emerge because they are closely monitoring the Chinese domestic market, which has spiked 13-14% month on month.

“We have no choice but to increase MEK offers for March and April shipments due to the erosion in margins from high naphtha costs,” said a northeast Asian supplier.

Chinese plants scheduled to shut from March include Ningbo Haiyue, Zibo Qixiang and Petrochina Lanzhou.

“It is still early to conclude the negotiations, with transactions likely to be finalised once the Japanese producers announce their offers for later March/early April loading,” a northeast Asian trader said.

Demand has been slower than expected after the Lunar New Year, but suppliers were confident that downstream demand in the paints and coatings sector will emerge in March.

MEK’s main application is as a low-boiling solvent, with half of global demand derived from the paints and coatings industry. The material can also be used in rubber-based industrial cements and printing inks.

Focus article and interactive by Koh Yuanlin