SunSirs: China MTBE Market is on the Rise in 2023, What is the trend in 2024?

Introduction: Methyl tert butyl ether (MTBE) is an organic compound that can be added to gasoline as a catalyst. It plays a catalytic and combustion supporting role during gasoline combustion, allowing gasoline to fully burn and decompose into water and carbon dioxide. Its oxygen content is relatively high, which can significantly improve car exhaust emissions.

Firstly, let's review the trend of the MTBE market in 2023. The domestic MTBE market experienced strong fluctuations in 2023, with an average price of 6,100 RMB/ton at the beginning of the year and 6,512 RMB/ton at the end of the year, representing a year-on-year increase of 6.76%. From the MTBE price trend chart, it can be seen that the highest point of MTBE prices in 2023 occurred in October, with a highest price of 8,162 RMB/ton. The lowest point of MTBE prices occurred at the beginning of the year, with a lowest price of 6,100 RMB/ton and a maximum amplitude of 33.81%.

In the first half of 2023, the overall domestic MTBE price was in a trend of first rising and then falling. The international crude oil price rose significantly at one point, effectively supporting the bullish enthusiasm of market operators. At the same time, with the support of equipment maintenance and export port orders, the spot supply of MTBE was further tightened, and MTBE manufacturers actively pushed up with smooth shipments. The center of gravity of MTBE prices has significantly shifted upwards. Starting from May, although the supply side of MTBE is still tight and supported by export orders, domestic downstream demand is weak. MTBE manufacturers ensure that the shipment rhythm is to lower prices first and enter a fluctuating downward channel.

In the third quarter of 2023, the domestic MTBE market showed a fluctuating upward trend. In mid to late July, under the influence of favorable exports, the supply of goods in the MTBE market was tight, coupled with improved trading in the gasoline market and accelerated terminal demand. The dual benefits of supply and demand supported the upward trend of the MTBE market. In August, the international crude oil market performed well, supported by some equipment maintenance and export orders, and the MTBE market continued to remain at a high level. Entering September, driven by positive news, downstream companies showed good enthusiasm for entering the market. MTBE manufacturers shipped smoothly and the market fluctuated higher. However, as downstream companies showed a fear of high prices, market trading slowed down. However, supported by low inventory and export orders, many manufacturers operated at high prices.

In the fourth quarter, the domestic MTBE market situation can be described as a unilateral decline, turning into a weak oscillation towards the end of the year. Due to the sustained low international crude oil prices and reduced gasoline consumption during winter travel, the purchase volume of MTBE has decreased. The driving force of some export sources has enabled MTBE to maintain a volatile trend at the end of the year.

Where is the domestic MTBE market path in 2024? Let's take a closer look:

On the supply side, due to severe overcapacity in the domestic MTBE industry, the new capacity of MTBE has been very limited in the past five years. In 2023, MTBE will increase production capacity by 790,000 tons to 21.8 million tons, and two sets of Dalian Hengli and Anqing Taifa will be put into operation by the end of the year. In 2023, MTBE production profits slightly improved, even reaching new highs since 2016 in the second and third quarters. The MTBE operating rate has increased to 61%, reaching a new high in nearly six years. The production increased to 16.02 million tons. The supply of MTBE in 2024 has a bearish impact.

Import and export, MTBE's export performance in 2022 was impressive, and this strong performance continued until 2023, playing a significant role in alleviating domestic supply pressure. However, the current demand is showing a weak pattern, and the overall international market is weak, which will have a certain negative impact on MTBE exports. At the same time, if we want to enhance the competitiveness of domestic MTBE in the international market, it will also lead to certain suppression of MTBE prices. In 2023, the import volume of MTBE sharply decreased from 56,000 tons to 2,496 tons, while the export volume increased by 23% year-on-year to 1.84 million tons. The import volume hit a new historical low while the export volume reached a new historical high. In 2024, there were positive factors affecting MTBE exports.

On the demand side, China's new energy development momentum is good, and its substitution effect on traditional petrochemical gasoline will be further highlighted. About 93% of domestic MTBE is added to gasoline, and as the growth rate of gasoline consumption slows down, the demand for MTBE will also tend to slow down, which will be reflected in changes in MTBE prices. The demand for MTBE in the coming years is not optimistic.

In the future, with the support of fundamentals, Venezuela's crude oil resources decreased in the first half of the year, and international crude oil prices are expected to recover and consolidate. As a downstream product of crude oil, the trend of crude oil will have a certain bottoming effect on its price. With a slight increase in supply and a substitution effect of new energy on traditional gasoline, MTBE consumption may gradually narrow. At the same time, there are also expectations of a decrease in external demand, which will put some pressure on MTBE prices.

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