Chinese MTBE producers face squeezed margins amid soaring butane costs

Chinese MTBE offers remained on the higher end at around $620-$630/mt, or even $640/mt in some instances, despite absent arbitrage opportunities between the Straits and Chinese markets throughout the year-end season of 2025 and the first half of January, as heard from market sources in the region.

Demand has been heard firmer in the Straits, demonstrated by tradable indications heard at MTBE plus $4/b to Platts Singapore 92 RON swaps, with supply tightness according to traders in Singapore and Malaysia. Yet, Chinese producers have been maintaining high offer levels, facing pressure from higher feedstock costs, especially butane.

"Liquefied Petroleum Gas prices have soared," shared a North China-based MTBE trader. Butane prices were heard as high as Yuan 5,100 ex-factory in the China domestic market, while MTBE offer levels were heard lower at Yuan 5,000 in China, the same trader said, leaving no room for production margins.

Chinese producers grappled with narrowing profit margins from rising butane feedstock, leading several major producers to reduce operating capacity to the point of only fulfilling term contract volumes in some instances, as heard from domestic producers.

"The price of butane has the greatest impact on us," said a producer in South China. He elaborated that the demand for butane had risen significantly with the additional MTBE production capacity set to begin operating in 2026, when asked about rising feedstock costs.

In addition to butane, methanol feedstock costs in China were also anticipated to rise, exacerbated by Trump's tariffs on Iran exports. However, the current focus of Chinese producers seems to be on butane, with the effects of methanol imports remaining to be seen.