Market and product

SINGAPORE (ICIS)--Gasoline blenders in Asia have been shifting away from methyl-tertiary butyl ether (MTBE) to boost their fuel’s octane level, preferring to seek alternative solvents that could be procured at cheaper costs, industry sources said on Thursday.

MTBE prices have risen to $1,164-1,166/tonne (€861-863/tonne) FOB (free on board) Singapore on 30 January, gaining $18/tonne in the previous two trading days on the back of strong upstream crude values, according to ICIS.

“Gasoline prices are firming up and blending is good. It’s just that MTBE is not used as the blending solvent,” a Singapore-based trader said.

The bulk of Asia’s MTBE output goes into gasoline blending, with prices of the solvent usually trackingcrude and gasoline values.

While MTBE may continue to increase in tandem with fuel prices, the pace of gains may slow down because of poor demand from gasoline blenders, market players said.

In southeast Asia, demand for MTBE for blending was subdued in the presence of more competitively-priced naphtha, industry players said.

“We are even hearing more European naphtha coming over into Asia to meet this opportunistic demand,” a third trader based in Singapore said.

At midday, open-spec first-half naphtha contract was at $1,003/tonne cost and freight (CFR) NE (northeast) Asia, according to ICIS.

MTBE has been hovering above $1,000/tonne FOB Singapore for the past six months, and priced higher than naphtha since 2011, according to ICIS.

In addition, a recent narrowing of the price spread between 92 RON and 95 RON gasoline to less than $3/bbl could not justify the use ofexpensive MTBE as a blending solvent, market players said.

At Asia’s biggest gasoline consumer – China – blenders have started using reformate, mixed toluene and xylenes and other longer carbon chain solvents as alternative blending materials, partly on concerns that a consumption tax will soon be imposed on MTBE.

“What we hope is [for the government] to cancel the tax,” said a Chinese trader.

Even if the tax is postponed, the fear is still in the market that it will come in the form of a back tax, the trader said.

“Apart from the tax issue, these alternative blending solvents are cheaper, [with] pricing at $900-1,050/tonne CFR China,” the third Singapore-based trader said.

In China, spot MTBE prices were assessed at $1,184-1,186/tonne on a CFR basis, according to C1 Energy, an ICIS service in China.
“Gasoline demand in China is rosy, but MTBE is not benefiting [from] it,” an MTBE producer said.

Driving season in the country is expected to pick up during the week-long Lunar New Year holiday, boosting gasoline consumption, he said.

China is on holiday on 9-15 February.

“Hopefully, China’s demand [for MTBE] will recover [post Lunar New Year],” the producer said.

($1 = €0.74)