Singapore—The Asian octane market is set to face challenges over April 12-16 as headwinds emerge from slowing demand for naphtha, MTBE, ethanol and toluene. However the isomer mixed xylene complex could see some upside after a recent increase in demand for May deliveries.
Naphtha** The onset of turnaround season in North Asia will continue to exert downward pressure on the Asian naphtha complex this week, with Japan's Idemitsu kickstarting the season with the shutdown of its Chiba cracker from April to May, and Mitsubishi Chemical's Mizushima cracker and LG Chem's Daesan cracker preparing to shut in May.
** The Asia naphtha physical crack against ICE Brent crude futures was down $2.425/mt day on day at $87.425/mt at the Asian close April 9, S&P Global Platts data showed. This brought down the benchmark C+F Japan naphtha price to $557.75/mt April 9, a near three-month low; it was last lower Feb. 11 at $547.125/mt, Platts data showed.
** With naphtha prices falling, the Singapore reforming spread -- the difference between FOB Singapore 92 RON gasoline and FOB Singapore naphtha derivative -- rose 20 cents/b day on day to $9.29/b April 9, providing more incentive for gasoline blenders in Singapore to seek naphtha for blending rather than cracking purposes.
MTBE**The Asian MTBE market is expected to remain rangebound in the week starting April 12 as expectations of new capacity additions and a stable to weak downstream methyl methacrylate market cap any meaningful recovery in prices.
**Trading in MMA, in which MTBE is used as a feedstock, will likely remain thin in Asia as China emerges from a holiday demand lull last week, although demand in the medium term is expected to pick up strongly as the upcoming heavy turnaround season in Asia injects support.
** Reports of new capacity additions have participants reevaluating regional supply. China's Zhejiang Rongsheng was heard to be planning to start its No. 2 150,000 mt/year MTBE plant at Zhoushan in Zhejiang province in mid-2021, a source close to the company said.
** Pressured by both poor demand and rising supply, Asian MTBE prices fell $3.50/mt day on the day to $695.50/mt FOB Singapore April 9, Platts data showed.
Toluene**Asian toluene will remain on the back foot this week as blendstock substitutes such as MTBE continue to be preferred.
**Although lower than MTBE, toluene prices are still not low enough to entice blenders to switch, sources said. The FOB Korea toluene physical price averaged $685.20/mt last week, marginally below the FOB Singapore MTBE marker at $702.50/mt.
**Increasing gasoline exports from China have reduced the need for regional buyers to seek toluene for blending purposes, while steadily increasing run rates at Chinese refineries have reduced China's toluene import requirements.
Ethanol**Lackluster regional demand is expected to continue weighing on sentiment in the Asian ethanol complex this week. Demand for fuel ethanol in the Philippines, a major buyer of ethanol in Asia, has fallen around 50%, according to market sources, as a worsening domestic COVID-19 situation makes buyers apprehensive about purchasing.
**Supply-side factors outside Asia are expected to keep ethanol prices buoyed this week, with a bullish World Agricultural Supply and Demand Estimate report and US Energy Information Administration data showing a heavier than anticipated cut of 472,000 barrels in US ethanol stocks in the week ended April 2.
**Prices of US ethanol delivered to the Philippines were assessed higher at $599/cu m April 9, up from $569.67/cu m on March 26, Platts data showed.
Isomer-MX** Improvements in regional supply-demand dynamics are expected to keep the Asian isomer-MX market supported this week. Fresh demand from Chinese end-users was heard to have emerged last week for May cargoes, while upcoming turnarounds in Japan will impact supply.
** Asian isomer-grade MX was assessed up $11/mt week on week at $725/mt FOB Korea April 9, while the spread over naphtha widened $15.25/mt over the same period to $167.25/mt, Platts data showed.
