Asia octane: Key market indicators for July 12-16

The Asian naphtha complex will continue to lead regional octane blendstocks this week July 12-16 as bullish drivers on both the demand and supply front fuel the blendstock's upward rally.

Other blendstocks such as MTBE, toluene and isomer-mx continue to face headwinds from thin regional blending demand, which is slated to worsen in the near term given steadily rising COVID-19 cases across Asia.

Naphtha

**The Asian naphtha complex is likely to remain firm throughout this week, as high LPG prices continue to shift demand for petrochemical feedstock toward naphtha, further boosting the already firm fundamentals that had stemmed from limited European arbitrage supply, sources said.

**Reflecting firm sentiment, the CFR Japan naphtha physical crack against front month ICE Brent crude futures was last assessed at $123.025/mt at the July 9 Asian close, an increase of $9.78/mt week on week, Platts data showed.

**The key CFR Northeast Asia ethylene spread to benchmark C+F Japan naphtha cargo rose to $298/mt on July 9, above the typical breakeven spread of $250/mt for integrated producers. Being above the typical breakeven spread hints that naphtha would remain in demand in Asia as crackers run at full, or close to full capacity, sources said.

MTBE

**Bearish fundamentals are likely to keep the Asian MTBE complex on the backfoot this week, with gasoline blending demand in China and Malaysia staying thin, while domestic inventories in India and South Korea heard to be rising, sources said.

**South Korea's LX MMA, formerly LG MMA, was also heard to be operating its new 100,000 mt/year MTBE plant in Yeosu at full capacity, after starting operations in mid-June.

Toluene

**Fundamentals in the Asian toluene market are expected to stay lackluster this week, with support from downstream aromatics such as paraxylene and benzene having weakened through last week, while demand-side concerns weigh on overall sentiment as rising COVID-19 cases across the region pressure gasoline blending demand.

**Taiwan's CPC Corp. has scheduled maintenance at its No. 3 aromatics unit from mid-July to end-September, Platts reported previously. The unit can produce 27,000 mt/year of benzene, 135,000 mt/year of toluene and 156,000 mt/year of isomer-MX.

Isomer-MX

**The Asian Isomer-MX market is expected to trace developments in the crude oil and Asian paraxylene fronts this week, with isomer-mx trade activity staying thin due to poor regional blending and aromatics demand.

**Some support is likely to stem from Taiwan's CPC Corp.'s upcoming turnaround at its No. 3 aromatics unit, with no August-loading isomer-mx sell tenders issued thus far due to the upcoming turnaround.

Ethanol

**Trading activity in the Asian ethanol complex is expected to stay muted this week, since buyers in the Philippines are already filled up for Q3. Buy activity should return either at end-July, or early-June, industry sources said.

**Against the backdrop of muted activity, Asian ethanol prices continue to track supply-side factors in the US. For one, corn futures still face downward pressure from wet weather in major corn producing states in the US.

**US ethanol production remained above 1 million b/d for the eighth consecutive week, with domestic ethanol production totaling 1.067 million b/d in the week ended July 2, data from the US Energy Information Administration showed. Therefore, the price of US ethanol delivered to the Philippines fell to $654.33/cu m on July 9, down from $699/cu m on July 2, Platts data showed.