Asia MEK prices seen strong in Sept on demand, tight supply

29 August 2014 08:39 Source:ICIS News

Focus story by Veena Pathare

SINGAPORE (ICIS)--Spot Asian methyl ethyl ketone (MEK) prices are likely to remain firm in September with improved support on both demand and supply fronts, despite the currently weak demand situation in Asia, market sources said on Friday.

The presently subdued demand for end-August shipments across Asian markets is not likely to deter regional producers from pursuing firm offers for September-loading cargoes, as producers hope to achieve their targeted prices in September with improved demand for spot cargoes from markets such as South Korea, market sources said.

Producers are also optimistic that their September offers would receive additional support from the continued tightness in supply across global markets, according to market sources.

MEK prices in Europe as well as the US have been making strong gains in the recent weeks, buoyed by limited availability in the spot markets.

MEK spot prices in northeast (NE) Asia were assessed at $1,490-1,515/tonne CFR (cost and freight) NE Asia in the week ended 22 August, and stable from the previous week, ICIS data showed.

Likewise, prices in southeast (SE) Asia were assessed as unchanged from the previous week at $1,520-1,550/tonne CFR SE Asia, also according to ICIS data.

Subdued demand across northeast and southeast Asian markets has widely capped deals and discussions for August shipments since late July.

Most northeast Asian producers had targeted higher offers for August shipments in the previous weeks, citing limited availability from Japan as well as China.

Supply from Japan in August remained limited following upcoming scheduled maintenance turnarounds at multiple facilities in September and October.

Consequently, offers to the key export market of South Korea remained few, and capped at $1,515/tonne CFR South Korea, as producers opted to build inventories ahead of the turnarounds and largely focussed on domestic demand.

“We have greatly limited our volumes to South Korea are not allocating any cargoes to southeast Asia market in August, as we are in the process of preparing for a turnaround next month,” a Japanese producer said.

MEK availability in China in August was also deemed limited, on account of a maintenance turnaround at a regional producer's facility that began on 16 August and is expected to last until 1 October.

Furthermore, an explosion at a nearby storage site in China in early August affected the warehouse operations at a separate MEK producer facility, although it was not directly affected by the explosion.

Offers from China, as a result, rose by $20-40/tonne week on week to $1,500-1,520/tonne FOB China equivalent to $1,520-1,540/tonne CFR South Korea and $1,550-1,570/tonne CFR SE Asia for end-August and early September shipments.

However, these higher offers were largely met with weak response from importers in both northeast Asian and southeast Asian markets.

Demand from the key market of South Korea remained seasonally weak through August, owing to the summer months.

Also, several South Korean buyers held ample inventories that additionally hampered appetite for fresh imports. Buying ideas remained far and few, and capped at $1,500/tonne CFR South Korea or lower.

Furthermore, a narrow spread between import offers and domestic prices kept traders at the sidelines.

“Import offers for MEK and domestic prices in Korea are almost at the same level. There is little or no margin for us to import and sell locally. So it is better for us to monitor the trend in prices until the situation improves,” a South Korean trader said.

Demand in southeast Asia remained largely weak in the first half of August, as most buyers were still returning from their Eid ul-Fitr holidays in the previous weeks.

A majority of importers opted to wait and see the trend in offers for August shipments. Buying ideas among these importers remained capped at $1,520/tonne CFR SE Asia or below, similar to prices seen before the Eid holidays.

Asian producers expect this situation to change end-August onwards, when a bulk of South Korean importers are expected to be back in the market ahead of the peak demand season that begins in September.

An increase in South Korean domestic prices following restocking of inventories leading to improved offtake is expected to support the import offers for September, producers said.

In such a situation, southeast Asian importers would have limited choice but to purchase at higher prices, producers added.

MEK is a solvent widely used in the manufacture of industrial paints, coatings and printing inks.

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By Veena Pathare