OUTLOOK ’14: China’s MTBE demand growth to continue next year

Hedy Dong

26-Dec-2013

By Hedy Dong

SINGAPORE (ICIS)–China’s demand for methyl tertiary butyl ether (MTBE) is forecast to continue to increase in 2014, supported by growing gasoline production and fuel quality upgrades, industry sources said on Thursday.

MTBE consumption in China is expected to rise by 24% year on year to around 7.9m tonnes in 2014, according to C1 Energy, an ICIS service in China.

In China, over 90% of MTBE goes into the gasoline blending sector, consumed by refiners and gasoline blending players.

Chinese refiners’ crude throughput is likely to keep increasing in 2014 with the start-up of new refineries and capacity expansion of the existing ones, refinery sources said. The rise in gasoline output will push up demand for MTBE as a result.

In addition, severe environmental pollution in China has strengthened the government’s drive in fuel upgrade, which will in turn bolster the country’s MTBE demand, market sources said.

More hydrogenation units and desulphurisation units, which are used to reduce sulphur content in gasoline, will be launched in an effort to reduce pollution.

However, such units will cause losses in the octane number of the fuel. Hence, refiners will have a greater demand for MTBE, which can be used as an oxygenate to raise the octane number.

MTBE demand from private oil blending players, on the other hand, is expected to decline in 2014, because of higher costs and risks for speculative trading, market sources said.

China started adopting a new pricing mechanism for domestic fuel in March this year, which shortened the price adjustment cycle from 22 consecutive working days to 10.

The new mechanism makes speculation much harder as the fuel prices are more frequently adjusted, industry sources said. As such, market players prefer hand-to-mouth purchases.

The MTBE demand in the Chinese chemical sector is also likely to rise in line with the expanding production capacity of isobutylene-isoprene rubber (IIR) and methyl methacrylate (MMA), downstream products of MTBE, according to chemical producers.

About 480,000 tonnes of MTBE are likely to be used in the chemical sector in 2013, accounting for 7.5% of the projected MTBE demand in the year, C1 Energy estimates.

On the supply front, the country’s domestic production is likely to maintain a fast growth in 2014 because of new technologies available to producers that enable them to obtain feedstock for MTBE production, the industry sources said.

China’s MTBE production is forecast to grow to 7.8m tonnes in 2014, up 25.6% from the projected 6.21m tonnes this year, according to data from C1 Energy.

The country’s MTBE production capacity is expected to exceed 12m tonnes/year by the end of 2014, C1 Energy estimates.

Increasing MTBE producers in China have adopted new approaches to get feedstock for MTBE production since 2010, including building isomerisation units and isobutane dehydrogenation units that convert n-butene and isobutane contents of liquefied petroleum gas (LPG) into isobutene, according to market players.

This helps resolve the long existing bottleneck of feedstock supply shortage for MTBE producers and paves the way for larger-scale MTBE production.

China is expected to remain a net importer of MTBE in 2014.

The country’s imports of MTBE are expected to reach 200,000-250,000 tonnes in 2014, largely stable with the projected 250,000 tonnes this year, C1 Energy forecasts.

READ MORE

Global News + ICIS Chemical Business (ICB)

See the full picture, with unlimited access to ICIS chemicals news across all markets and regions, plus ICB, the industry-leading magazine for the chemicals industry.

Contact us

Now, more than ever, dynamic insights are key to navigating complex, volatile commodity markets. Access to expert insights on the latest industry developments and tracking market changes are vital in making sustainable business decisions.

Want to learn about how we can work together to bring you actionable insight and support your business decisions?

Need Help?

Need Help?