SunSirs: Weak Consolidation of MTBE Market in China

According to the Commodity Market Analysis System of SunSirs, the domestic MTBE market is experiencing a weak consolidation. From November 1st to 30th, the price of MTBE dropped from 6,787 RMB/ton to 6,587 RMB/ton, with a 2.95% decrease in price during the cycle, and the price remained stable year-on-year.

At the beginning of the month, the international crude oil market continued to decline, and the mentality of the industry was suppressed. The MTBE market once again entered a downward trend, while export orders were extremely limited, and domestic oversupply pressure continued to exist. The demand side remained weak, and the gasoline refining operating rate declined. The enthusiasm of the industry for purchasing related gasoline raw materials was not good, so manufacturers encountered a cold situation in their shipments, mainly allowing profits to increase.

In mid month, the crude oil market remained in a downward trend, and the MTBE market once again entered a downward adjustment. The overall operating situation was weak, and the gasoline market was under pressure and fell. Consumers and wait-and-see were the main factors, and businesses were cautious in purchasing related gasoline raw materials. Due to the active negotiation of MTBE export orders and some manufacturers exporting to Hong Kong, the decline in the MTBE market was limited under slight positive conditions.

In the latter half of the month, international crude oil has rebounded compared to the previous cycle, and the mentality of the industry is highly supported. At the same time, raw material costs and prices have risen, and heterogeneous units are on the edge of profit and loss. Manufacturers are also not willing to give up profits. In terms of downstream gasoline, manufacturers are replenishing their inventory in stages and still have some enthusiasm for purchasing MTBE. Manufacturers in the northern region have relatively smooth shipments, but resource supply is still high under high operating rates, making it difficult for the market to rise. The MTBE market is mainly stable and consolidating.

As the end of the month approaches, international crude oil fluctuates and the domestic MTBE market fluctuates narrowly between small areas. The mainstream operating range in Shandong region is concentrated between 6,500-6,600 RMB/ton, with sporadic adjustments. Due to the rise in raw material prices and losses in heterogeneous units, manufacturers are not willing to offer profits. However, the weak demand side hinders the market's upward trend, and under mutual competition, the market undergoes sporadic and slight adjustments.

On the cost side, in terms of crude oil, the international crude oil futures market was weak and volatile in November. At the beginning of the month, the strong performance of the US dollar will have a certain inhibitory effect on oil prices. In mid month, the market showed some fatigue due to the tense geopolitical situation in the Middle East, and the crude oil supply in the Middle East region was not significantly affected in the short term. The market focus is gradually shifting to the weakening demand outlook that may be brought about by the Federal Reserve's interest rate hike. In the latter half of the month, international crude oil futures plummeted, mainly due to a significant increase in US crude oil inventories, and more importantly, weak economic data exacerbating concerns about future demand. Overall, crude oil prices are in a weak position.

On the demand side, in terms of gasoline, as the temperature in the north decreases and the private car travel rate increases, it promotes retail gas station shipments; On the other hand, the weakening of terminal demand has weakened the purchasing and selling atmosphere in the diesel market, with middle and downstream merchants purchasing on demand while consuming inventory, resulting in a mild trading atmosphere in the market. The gasoline market trend is relatively strong, providing certain support for the MTBE market. Short term MTBE demand is influenced by favorable factors.

On the supply side, the current operating rate of the equipment is high, and the resource supply is relatively abundant. The Shenyang Waxing and Dongying Qifa facilities are still in shutdown. The Maoming Shihua facility resumed work on November 11th, with normal shipments. The Qingzhou Tian'an facility started operating at low load.

In terms of external trading, as of the close on November 29th, the closing price of the Asian MTBE market has increased by $2/ton compared to the previous trading day, and FOB Singapore closed at $928.05-930.05/ton. The closing price of the European MTBE market has decreased by $5/ton compared to the previous trading day, while the FOB ARA closed at $942.74-943.24/ton. The closing price of the US MTBE market increased by $38.06 per ton compared to the previous trading day, while the FOB Gulf offshore price closed at $1,008.12-1,008.47 per ton (283.98-284.08 cents per gallon).

According to future market forecasts, some manufacturers have expected maintenance of their equipment, resulting in a certain reduction in resource supply. There were many export orders delivered in December, with most of them arriving at the port in mid to late December. SunSirs MTBE analysts believe that the domestic MTBE market may recover in the short term.

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