Chinese domestic methyl tertiary butyl ether prices have been rapidly rising since July 25, by around Yuan 400/mt in South China to Yuan 5,350-5,400/mt, and by around Yuan 350-400/mt to Yuan 5,200-5,300/mt in East China Tuesday.
The recent rise in MTBE prices could be attributed to the recovery in crude oil prices over the same period, increased blending demand coinciding with a steady drawdown of gasoline inventories at state-owned refiners Sinopec and PetroChina, industry sources said.
On the supply side, a major East China MTBE producer Yantai Wanhua had been running at 60% capacity from July 12-26 because of the replacement of a main component used in MTBE production at the plant.
This has coincided with reduced operating rates by independent refineries in eastern China's Shandong province since mid-July due to state environmental compliance checks, leading to fewer spot MTBE cargoes in the market in East China.
However, the reduction in spot MTBE supply in the Chinese domestic market has been somewhat mitigated by the new 800,000 mt/year propylene oxide/MTBE joint venture between Huntsman and Sinopec Jinling that started commercial production in end-June.
In addition, Yussen Chemical in South China's Guangzhou province is expected to start commercial production at its new 450,000 mt/year Huizhou MTBE plant by August 20, after having started trial runs at the plant last week, S&P Global Platts reported earlier.
"The new MTBE capacities added in second half of the year will result in a more balanced supply demand situation in South China, with blenders more likely to look towards domestic MTBE for blending requirements instead of importing from Southeast Asia," said a gasoline blender.
China typically imports more than half of its MTBE demand from the Southeast Asian countries of Singapore, Malaysia and Thailand, which jointly contributed 60.5% of the country's total import volume in 2016, Chinese customs data showed.
Despite the recent increase in domestic MTBE prices in China, industry sources noted that the arbitrage window from Southeast Asia into South China remains firmly shut.
"Second-half August loading cargoes are being offered by Southeast Asian producers at premiums of around $30/mt to the Mean of Platts Singapore MTBE marker on a FOB basis, which is equivalent to around Yuan 5,425-5,550/mt on an import parity basis," said a Singapore based trader Wednesday.
"At the current premiums discussed, prices are too high for the Chinese to import," the source added.
The MOPS MTBE marker was assessed at $654/mt FOB Singapore Tuesday, the highest in more than two months.
The marker was last higher at $661/mt on May 24, Platts data showed.
