MTBE Market in China Dips in June as Supply Overshadows downstream Gasoline Demand

The MTBE (Methyl Tert-Butyl Ether) market in China faced bearish sentiments and experienced a period of significant downtrend during June 2024, resulting in low prices. This decline was attributed to high operating rates of feedstock Methanol which eased the production costs and low downstream demand from gasoline impacting both the supply and demand sides of the equation.

During June 2024, the MTBE prices declined by 4.1% when compared to May 2024 to settle at USD 930/ MT FOB Dalian, China amidst supply outpaces demand by the revival of idle production capacity during this timeframe. While some MTBE production facilities like Qixiang Tengda and Maoming Shihua resumed operations in June, their operating rates remain low. This indicates a cautious approach from producers despite the restart, suggesting abundant existing stockpiles. A significant rise in Methanol production from major enterprises has created an oversupply situation. Methanol is a key feedstock for MTBE, and this abundance translated to lower production costs for MTBE, further fueling the supply glut. Additionally, the major businesses' increased output of Methanol, the feedstock, resulted in surplus that lowered the cost of producing MTBE. The average operating rate of domestic methanol units from January to May of 2024 was 76.92%, which was a 6-percentage point increase over the same time the previous year.

Not only the supply, but the weak demand from downstream industries lowered the market enthusiasm during this period. Intermediaries and downstream users, particularly those in the gasoline sector, were adopting a wait-and-see approach. They were limiting purchases to essential restocking needs, resulting in small-scale market transactions. This cautious behavior further dampens the demand for MTBE product. The international upstream crude oil market has seen a significant decline, impacting the refined oil market, including gasoline. This decline translates to lower demand for MTBE, a crucial additive in gasoline production. Refineries were actively promoting gasoline sales due to the weak market conditions. This strategy aims to stimulate demand amidst sluggish economic activity and reduced consumer spending. However, no such new MTBE purchases were registered during this timeframe.

As per ChemAnalyst, the market of MTBE in China is expected to continue its downtrend in July 2024 on the back of low downstream gasoline demand. The gradual cancellation of voluntary production cuts by OPEC+ raises concerns about future supply growth in the global oil market. This can potentially lead to further downward pressure on crude oil prices, impacting the MTBE market.