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Key Drivers - Aug 16,2012

MTBE

Americas The average notional spot MTBE price in the US for this reporting period (August 9-August 15 2012) decreased by $52/MT to USD 1386 MT versus last week’s average price of USD 1438/MT.
Europe The average notional MTBE price in Europe for this reporting period (9-15 August 2012) slid back this week by $52/pmt to $1364 pmt compared with last week’s average of $1416/pmt.
Asia Singapore MTBE average values for this reporting period 9-15 August, 2012 increased $3/MT to $1198/MT FOB Singapore versus last week’s average price of USD 1195/MT due to muted demand in spite of higher gasoline prices.
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Market Commentary

MTBE - Newsletter#: 1348
Date: 08/16/2012

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Americas

The notional average MTBE spot prices in the US for this period are down 14 cpg to 390 cpg versus last week’s 404 cpg average. MTBE prices in the US moved down with European MTBE prices as buying interest weakened due to high costs. See Europe for more details. Demand for US product remains healthy with enough demand coming out of South America. Exports to South America came in at 199k MT in the month of June. Mexico now imports more MTBE than Venezuela and it is has imported 76% more MTBE compared to last year in June. Margins remain healthy, but are down compared to last week. Our hypothetical MTBE margin price is at 188 cpg as feedstock prices remain low. No new MTBE production issues to report. Enterprise’s BEF MTBE unit was down a short time 2 weeks ago, but is at normal operating rates now. The other MTBE producers report no issues and running at normal rates. A major producer reports they are sold out thru August and may not have any barrels for the spot market in September. According to EIA statistics 171K MT tons of MTBE were produced in May, up from 165K MT in the previous month. The current calculated cash cost to produce MTBE at an average plant, based on estimated total plant cash costs is 199 cpg. Raw material costs are 187 cpg. Estimated average MTBE profit margins decreased to 188 cpg from 213 cpg reported in previous newsletter.

Europe

Demand for gasoline around Europe is largely unchanged in what has been a disappointing summer period so far. In recent days it is reported that demand for imports cargos of gasoline for Nigerian market has returned after a few weeks of inactivity. Furthermore, gasoline inventory draws on US Atlantic Coast point to potential increase in import requirements from Europe, but for now arbitrage opportunities to US remain limited. Further upward movement in gasoline values this week was again viewed as a consequence of rising Crude Oil values rather than demand driven. Average gasoline values in Northwest Europe were assessed at $1070/pmt up $44/pmt on last week’s assessment. Once again, limited trading of MTBE over the last week as market participants are again reluctant to offer aggressively due to concerns of continued balanced/tight market in this region. Further indications, on whether incremental tender demand can be expected from South America, were being sought by several participants. No apparent desire to offer aggressive levels in Europe for now at least. Notional pricing is assessed at $1364/pmt reflective of MTBE v Gasoline ratios quoted by sellers over the course of the week. Although blending economics continue to look attractive with Gasoline v Naphtha delta still around $130+/pmt, market participants still imply that other octane components are more favourable than MTBE given the still strong MTBE factor v gasoline. Continued talk of limited supplies of C4s impacting MTBE production levels is heard. Olefins Cracker operators continue to run units in a cautious manner having seen their feedstock price shoot up markedly, since the start of the month when price increases were pushed through in the belief that they would improve margins on ethylene and propylene. Additional sources of C4s are hard to locate according to MTBE producers in the region who could use the supplies to maximise MTBE output. The forced closure of a large storage terminal in Rotterdam due to safety concerns mentioned in last week’s report continues to cause logistics difficulties impacting the usual ‘flow’ of both MTBE and gasoline. One market participant is currently supplying customers direct from production source rather than via this intermediate storage point. Furthermore, it remains unclear how much MTBE is currently stranded within the terminal itself where board to board loadings of barges directly from import vessels is said to continue and alternative storage locations are being utilized where possible. Over the reporting period, notional MTBE price levels ranged from high seen on both Thur. 9/Wed. 15 August of $1377/pmt and a low on Tuesday 14 August of $1352/pmt. Although the average MTBE v gasoline factor remains strong at 1.27 for the period, its level is well below last week’s average of 1.38. Once again, market participants describe the period in late July early August during, which the factor was +/- 1.40 level as unsustainable and are not surprised about downward shift given that US MTBE production problems appear to be largely resolved for now. The arb remains open to divert MTBE from the Middle East to ship to Europe versus shipping to Asia as European MTBE prices decreased USD 52/MT while Singapore prices increased by $3/MT and is now $166/MT lower than European prices.

Asia

MTBE prices in Singapore ranged from a low of $1180/MT on Thursday, August 9th to a high of $1215/MT on Wednesday, August 15th. Regional MTBE markets were very quiet this reporting period in SEA as key countries were on holiday to celebrate the end of Ramadan. Korea had a public holiday on Wednesday. Then Japan while not on public holiday celebrated their moon festival this week, which usually warrants a customary day off for non-banking office employees. As such, prices were flat around $1185-1195/MT from Monday to Wednesday. Activity was a minimum as sellers were also trying to push spot discussions firmly into the $1200 range. That was achieved today with Singapore bids at $1200-1205/MT versus offers at $1215-1220/MT. Demand remains limited and centered around a major Singaporean buyer who needs MTBE and toluene for blend stock. The outlook remains unchanged with the above-mentioned buyer needed to continue the uptrend. Regional fundamentals are somewhat poor with Singapore stuck in a heatwave while Thailand braces for heavy rains and potential flooding. Exports opportunities to China remain lackluster at best. Even without the poor weather conditions, Far East Asia continue to underperform economically. Japan listed much poorer than expected GDP growth for Q2 at 1.4% versus expectations at 2.3%. Meanwhile China’s export growth fell to a dismal 1% for July compared to 11% in July of 2011 and expectations of 8% given the upswing in June to July PMI data. The arb remains open to divert MTBE from the Middle East to ship to Europe versus shipping to Asia as European MTBE prices decreased USD 52/MT while Singapore prices increased by $3/MT and is now $166/MT lower than European prices.

Current Prices

MTBE

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Unit
RegionPeriodProductSpot LowSpot HighUnitContract LowContract HighUnitDescription
NA Oct 13 N-Butane 1.4838 1.4838 $/Gal   
  Oct 13 Unleaded Regular 87-US 2.5046 2.5046 $/Gal   
  Oct 13 Unleaded Premium 93-US 2.7055 2.7055 $/Gal   
  Oct 13 Natural gas hub Houston Ship Channel All Index bid week 3.4750 3.4750 $/MMBTU   
  Oct 13 MTBE 3.0309 3.1040 $/Gal   
WE Oct 13 ULP R'Dam 938 938 $/MT   
  Oct 13 MTBE 775 787 €/MT   
AP Nov 10 Premium Gas - 0.15 - Singapore 766 766 $/MT   
  Oct 13 MTBE 1,026 1,052 $/MT   
NA = North America, SA = South America, WE = West Europe, AP = Asia Pacific
Historical Pricing
 
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