OUTLOOK ’19: Asia’s MTBE may face a supply deluge from new plants

SINGAPORE (ICIS)–Asia’s methyl tertiary butyl ether (MTBE) is likely to face a supply glut in 2019, owing to the onset of new plants while sluggish demand would prevail.

In 2019, increasing supply availability will change the regional balance.

The key plants in China are the mega-sized integrated refinery-petrochemical projects, including Hengli Petrochemical in Dalian and Zhejiang Petrochemical in Zhoushan.

In addition, all eyes fall on Malaysia’s Petronas Refinery and Petrochemical Integrated Development (RAPID) and the upgrade of Taiwan’s Formosa Petrochemical Corp (FPCC).

	MTBE Capacity (‘000 tonne)	Estimated Start Up (as of Nov ‘18)
Petronas, Malaysia	390	Q2 2019
FPCC, Taiwan	350	Q2 2019
Hengli Petrochemical, China	840	Q3 2019
Zhejiang Petrochemical, China	180	Q3 2019

Chinese import volumes had fallen year on year owing to ample local supply, after the 740,000 tonne/year Sinopec Jinling-Huntsman MTBE plant started in the second half of 2017.

China saw its first export MTBE to India from Sinopec Jinling-Huntsman, and the export volumes to Singapore and South Korea increased.

Meanwhile, South Korea will become a net MTBE exporting country.

S-Oil commissioned a high-severity residue fluid catalytic cracker (HS-RFCC) at Onsan in September 2018.

In October 2018, Korea’s MTBE imports fell by 58.4% to 5,402 tonnes from 12,979 tonnes in September 2018.

On the export side, the volume saw an explosive growth from 34 tonnes in September to 10,004 tonnes, indicating a net export of nearly 5,000 tonnes.

As northeast Asia becomes self-sufficient, the excess supply is poised to flow into the southeast Asia market, which is traditionally dominated by the Middle-East producers.

MTBE of Middle East origin including Saudi Arabia, United Arab Emirates and Qatar, accounts for more than 90% of Singapore import market.

A steady number of Middle Eastern origin cargoes continue to flow to Asia throughout 2018.

For 2019, several term Middle East contracts were concluded at lower levels than last year.

“The [term contract negotiation] process were more difficult than [it was in 2018],” said a northeast Asian producer.

Basis	Floating price premium for 2019 ($/tonne)	Floating price premium for 2018 ($/tonne)
CFR Singapore	FOB Singapore + 17	FOB Singapore + 22
FOB NE Asia	FOB Singapore + 0 to -1	FOB Singapore +3 to +5
CFR NE Asia	FOB Singapore +20	FOB Singapore + 25

In response to rising supply, producers may cut operating rates of the less profitable plant units, or convert MTBE units into alkylate ones.

Chinese MTBE consumption will be dampened as China’s planned implementation of Ethanol-10 (E10) gasoline draws near, and following recent hikes in domestic fuel prices.

Eleven provinces in the country have started trial usage of E10 gasoline this year, with Beijing and Tianjin expected to follow suit, before the expected full implementation in 2020.

E10 refers to the fuel with a 10% ethanol blend.

Ethanol, which is a chemical derived from food material, can replace MTBE as octane-boosting additive for gasoline in China.

Elsewhere in Asia, demand is driven by gasoline blending in Singapore and prices of other blending stocks such as aromatics products.

The consumption of MTBE became weak since October 2018 because of a gasoline supply glut.

Asia’s gasoline cracks over Brent crude oil weakened to below $1/bbl since November 2018.

Downstream gasoline will remain well supplied as several refinery capacity will be further added in 2019, including China’s mega refinery project, Malaysia’s RAPID and Adnoc’s Ruwais plant restart.

However, other downstream applications of MTBE would see a growth in capacity, supporting demand for the product.

China’s Wanhua Chemical 50,000 tonne/year MMA plant will start up in the first quarter of 2019, and Singapore’s Sumitomo Chemical will restart MMA Line 2 in the fourth quarter of 2019.

Both plants use MTBE as sole feedstock.

Focus article by Keven Zhang