Asia octane: Key market indicators this week

Singapore — Improved demand in the ethanol and MTBE markets are poised to lead the Asian octane blendstock markets in the week June 14-18, while participants in the Asian naphtha market shift their eyes onto a new half-month trading cycle from June 16 onward.

Meanwhile, waning demand is expected to weigh on both the Asian toluene and Isomer-MX complexes, adding drag onto the respective complexes, said market sources.

NAPHTHA

**Participants in the Asian naphtha complex are poised to see a shift in trading activity this week, with end-users in North Asia shifting their eyes toward deliveries in H1 August from deliveries in H2 July on June 16 onward.

**In light of the shift, regional naphtha fundamentals are expected to remain healthy, with the drivers of the uptrend in the naphtha FOB Singapore staying intact. The Asian naphtha complex, for one, had drawn strength from a decrease in the Singapore to Japan Medium Range tanker freight rate. The Singapore freight netback for naphtha fell to $16.45/mt on June 11's Asia close, a drop of $1.65/mt week on week to over a 3.5 month low, Platts data showed.

**In addition to shipping rates, an increase in the benchmark C+F Japan naphtha price had also contributed to the rise in naphtha FOB Singapore prices. Benchmark C+F Japan naphtha cargo at the Asian close June 11 notably hit a two and a half year high of $643.38/mt last being higher on October 23 2018 at $659.375/mt, Platts data showed.

**Meanwhile, the Singapore reforming spread -- the difference between Singapore 92 RON gasoline and Singapore naphtha derivative -- widened from $9.16/b on June 7 to $9.60/b on June 11 as gains in the gasoline complex outpaced that of naphtha, Platts data showed.

ETHANOL

**The Asian ethanol complex is expected to be supported week starting June 14, underpinned by both improvements on the supply and demand end.

**On the supply-end, participants continue take cues from a bullish US Department of Agriculture World Agricultural Supply and Demand Estimates report, which had US corn ending monthly stocks lower by 150 million bushels, an indicator for near term supply-tightness.

**On demand, Philippines domestic gasoline and ethanol demand continues to be on an uptrend, as the number of new COVID-19 cases having been isolated to the regions outside heavily populated cities such as Metro Manila. According to mobility data from Apple, driving activity in Manila has risen to around 40% below baseline levels, up from the low of around 80% below baseline levels recorded in April.

**US ethanol delivered to the Philippines as such, climbed to $701.33/cu m on June 11, up from the $695/cu m on June 4, Platts data showed.

MTBE

**Steady demand for MTBE from China is expected to keep the Asian MTBE complex supported week starting June 14, with Chinese blenders expecting deliveries of international MTBE cargoes that had been snapped up prior to the new consumption taxes on mixed aromatics.

** That said, some supply-side weakness could emerge in the near term, with South Korea's LG MMA planning to expand its MTBE production capacity by 100,000 mt/year in mid-2021. At present, LG MMA is running the downstream methyl methacrylate plants with a combined nameplate capacity of about 260,000 mt/year.

ISOMER-MX

**Bearish demand from China will likely weigh on the Asian isomer-mx market week starting June 14, with participants expecting the arrival of around 70,000-80,000 mt of mixed xylenes cargoes, most of which originate from South Korea.

** China isomer MX inventories were already reported rising in the week ended June 11, having risen to a total of 42,700 mt from the 41,300 mt in the previous week, according to Platts data.

**At the same time, traders note that demand remains muted, with regional blenders and PX producers staying away from excess buying of isomer MX amid ample inventories.

TOLEUNE

**The Asian toluene market will likely face more bearish pressure, as ample global supply of benzene mar prospects of further pickups in demand for the component from toluene disproportionation plants

**That said, gasoline blenders are likely to take more interest in using toluene as a blending component should toluene prices fall even further, sources also noted, especially against the backdrop of stronger MTBE prices.

**On the close of Asian trade June 11, the FOB Korea toluene physical has was assessed at $734/mt, the first time since April 30 that the blendstock was assessed lower than the MTBE FOB Singapore, which was assessed at $751/mt, Platts data showed.