USES

At least 90% of methyl tertiary butyl ether (MTBE) produced in Asia goes to the gasoline blending pool to boost octane levels – for example blending RON88 to 92 or RON92 to 95.

Up to 3-5% of the market uses it as a blending component for some end products.

The remainder of MTBE usage is to produce methyl methacrylate (MMA) – this is particularly prevalent in northeast Asia.

MTBE can also be used to manufacture pure isobutene by back-cracking, and this product is in turn used to make isobutylene isoprene rubber.

SUPPLY/DEMAND

Changes in the supply of MTBE have mainly been dictated by the new start-ups in China, since the market is relatively mature in the rest of Asia. Supply has been increasing since the start of 2017, with at least two new plants coming up in China with a combined capacity of more than 800,000 tonnes/year. Production rates of some plants were not as high as expected because of the lack of raffinate 1 or raffinate 2 feedstock and squeezed margins – a situation particularly prevalent in China.

On the demand front, the usage of MTBE continues to be focused on two types of gasoline blending – for higher RON95 or RON97 or for lower RON88-92, which is mainly used together with naphtha.

From the upstream gasoline perspective, demand to fulfil higher-RON gasoline is still mainly from Malaysia, the Middle East and Indonesia. The Vietnamese market could open for blenders because of the new taxation policies on gasoline cargoes loading from southeast Asia.

PRICES

Asia’s MTBE prices are assessed in tandem with RON92 FOB Singapore gasoline prices. The correlation between the two has remained high since the first half of 2017 and is expected to continue until the end of the year.

Prices have been persistently volatile amid mixed gasoline supply and demand fundamentals for the first half of 2017. On the other hand, the MTBE factor, which is a measurement of MTBE prices relative to RON92 FOB Singapore gasoline prices, has been between 1.12-1.25 for the first half of the year. This translates to a relatively stable market trend despite the volatility in gasoline prices.

Some upside pressures on both FOB Singapore prices and the MTBE factor were the opened arbitrage window for exports to China; stable buying activities in the key Singapore import market; and the lack of exports from China. Downside pressures were weak gasoline fundamentals in southeast Asia since the early year.

TECHNOLOGY

The key process for producing MTBE in Asia is the reaction between isobutene and methanol over a catalyst bed in either a liquid phase or mixed gas-liquid phase reactor.

Sulphuric acid is sometimes used as the catalyst in these reactions.

The dehydration of tert-butyl alcohol, which is produced as a by-product in the making of propylene oxide (PO), is the second way of producing MTBE. This technology, however, is limited within Asia to a few producers such as Hunstman Jinling and Wanhua Chemical.

OUTLOOK

Supply is likely to remain long until 2018, as several projects are still expected to start up in the last quarter of 2017 and first half 2018 within northeast Asia, especially in China and South Korea. The start-up of the new S Oil PO/MTBE swing plant in early 2018 is expected to be a game changer for northeast Asia, as South Korea is expected to switch from a net importer to a net exporter because of ample supply and the slow growth rate expected in the domestic gasoline sector.

In addition, government-led structural changes to the domestic gasoline market in China are likely to dictate its import-export position. The likelihood of the government limiting gasoline export quotas is high going into 2018 and there is the potential of China being more dependent on local production, instead of buying imported material.

Lastly, the Singapore market is not expected to see large fundamental shifts as it continues to remain a blending hub within southeast Asia, with MTBE trade flows still likely to be mainly from the Middle East.