China looks to MTBE exports to ease inventories

Chinese MTBE producers are looking to exports as a way to ease mounting inventory pressure on the back of slowing domestic demand with the country's coronavirus outbreak.

Limited domestic truck deliveries, as well as continuing weak Chinese gasoline demand, has led to building inventories of the octane booster. At least one large-scale MTBE producer in east China has cut production rates from 90pc to 60pc in response to mounting storage pressure. Some smaller independent producers in Shandong province have completely halted output.

The Chinese producers are also looking to exploit higher international MTBE prices following a steep slump in domestic values. Prices in east and south China slumped to a seven-month low by 7 February as producers slashed prices because of weaker buying interest and sluggish gasoline demand. Prices in east China had fallen by 800 yuan/t to Yn4,725/t, while prices in south China dropped by Yn1,200/t to Yn4,525/t. This equates to $568/t and $544/t on an import parity basis respectively.

There has already been at least two China-origin MTBE cargoes sold to Taiwan and southeast Asia for second-half February and March arrival as gasoline demand outside China is comparatively firm. Fob Singapore MTBE prices are significantly above domestic Chinese prices, which is likely to encourage future exports. Fob Singapore MTBE prices were $595/t on 7 February based on Argus data, with freight costs for a 5,000t shipment from China to Singapore around $40-45/t. This leaves an intra-regional arbitrage of at least $6/t.

China last year exported 212,712t of MTBE. Singapore took the largest share of imports at 82,036t followed by South Korea with 42,057t and Malaysia at 35,456t.

By Toong Shien Lee