SINGAPORE (ICIS)--China’s domestic methyl tertiary butyl ether (MTBE) prices are expected to come under downward pressure for a long term as a result of overall weak demand from gasoline blenders who have reduced production.
Downstream refiners and blenders largely stand on the sidelines and have reduced operations in line with strong government initiative to improve environment in the country.
The State Council of China has released a three-year action plan to win a battle for a blue sky on 3 July, planning to ban the selling of blending components in the name of chemical feedstock and the use of chemical feedstock in oil blending.
This is the first time that oil blending is banned in the circulation sector of refined oil products by the government in China.
This has heavily weighed on the blending market.
In the week ended 6 July, spot MTBE prices in east China dropped from the week-ago level due to the policy and increased inventories.
However, prices rebounded in south China and Shandong during the period, thanks to slightly higher buying interest amid firm crude and stimulated by the expectation of largest year-to-date increase in gasoline retail ceiling prices on 10 July.
Blended gasoline prices in south China, meanwhile, rose by CNY50/tonne over the same period to CNY7,500/tonne, the data showed.
An anticipated upward adjustment in fuel retail ceiling prices was a driving force.
The average operating rate at domestic MTBE producers fell from 52.42% to 49.65% in the week of 6 July because Dongming Petrochemical shut its 350,000 tonne/year unit for one-month maintenance on 5 July.
Their inventories rose but remained at medium levels.
Focus article by Winnie Huang