OUTLOOK ’17: Gasoline, crude price waiting game to lead MTBE, ETBE

By Vicky Ellis

LONDON (ICIS)–The industry is in “wait and see” mode, one MTBE and ETBE maker said at the end of 2016, thanks to the turbulent year for the energy complex, with gasoline led around by crude oil.

Fundamentally, changes in the oil market will of course influence the absolute price of the ethers, MTBE and ETBE.

To give the chemicals their full names, methyl tertiary butyl ether and ethyl tertiary butyl ether, they are closely linked in price and fortune to Eurobob gasoline, which rises and falls based on supply/demand dynamics and the price of oil.

Both are blended into gasoline to make the products which end up at the petrol pump, so gasoline consumption is key. Europe’s gasoline use has broadly flattened in the past couple of years in Europe’s major consuming nations (see charts) and this trend looks set to continue based on what 2016 data there is.

MTBE

At the end of the year, European demand for MTBE looked to be healthy in the first half of 2017, according to another producer, though it was too early to tell how this demand would be the second half of the year.

Globally, a change in China’s gasoline specifications starting from 2017, in order to reduce sulphur content, has been seen as a potential demand driver for cleaner burning ethers. However one analyst has downplayed the likely impact on Europe. It remains to be seen whether China’s own production will cater to this.

On the supply side, no dramatic changes are expected. Domestic supply may slightly increase following a 50% capacity expansion at the Ravenna MTBE/ETBE plant at the end of 2016. The Italy-headed energy firm Eni is understood to have begun this work in August.

The Ravenna site on the Adriatic coast, between Venice and San Marino, can produce either MTBE or ETBE and was geared to make the former earlier in the year.

Ravenna has a capacity of 140,000 tonnes, according to the ICIS Plants and Projects database, and so a 50% increase would lift this to around 210,000 tonnes.

ETBE

For the outlook of the market for ETBE, which is partly derived from ethanol, European biofuels legislation will be of interest.

Increased biofuel needs in some countries such as Belgium are anticipated, which will double its ethanol consumption thanks to a higher biofuels mandate. The country has mandated E10, meaning ethanol in petrol should effectively double to 8.5%.

Scandinavian growth may also be on the cards, suggested one market source, which may be linked to greater focus on biofuels in the region.

However a recent change in focus of the EU under its recent proposals for an updated Renewable Energy Directive (RED) have caused some concern in the first generation biofuels market, for a change in emphasis towards second generation biofuels.

In terms of external ETBE supply factors, imports have been weak in 2016. Lower Brazilian supply of ETBE to Europe is a likely key reason for this.

Partly, South American governments have been motivating consumers to take ethanol, according to industry feedback, which means more ethanol could stay in the region, reducing exports to places like Europe.

As things stand, this could imply that the producer Braskem, which has three ethers plants in Brazil, is unlikely to return its exports to Europe to levels seen before 2016.