China MIBK may hit record high on supply disruption in Japan

By Trisha Huang

MELBOURNE (ICIS)–Spot methyl isobutyl ketone (MIBK) prices into China may test the record high of $2,175/tonne (€1,675/tonne), as production issues in Japan further tightened regional supply, market sources said on Wednesday.

With spot MIBK prices having surpassed $2,000/tonne CFR (cost and freight) China this week, some market participants said prices may breach the previous all-time high set in August 2008.

For three weeks in August 2008, spot MIBK prices have stayed at $2,175/tonne CFR China, according to ICIS data.

Mitsui Chemicals, the largest of three MIBK manufacturers in Japan, shut its sole 30,000 tonne/year MIBK plant on 22 April, along with all the other units at Iwakuni-Ohtake Works in Yamaguchi prefecture following a blast at its resorcinol facility.

Its MIBK plant did not sustain any damage from the explosions and fire. However, the entire complex remains shut and Mitsui does not know when it will be able to resume MIBK production.

The unplanned shutdown of the Mitsui Chemical MIBK unit in is expected to affect the near-term direction of MIBK prices in Asia, particularly in China.

The Japanese producer, who had been a regular exporter of MIBK to China and southeast Asia, has held discussions with other producers in Asia for MIBK supplies.

Japan’s only other MIBK exporter, Mitsubishi Chemical, said it does not plan to offer cargoes to buyers abroad in June, when it will be carrying out an annual plant overhaul.

The third producer in Japan, KH Neochem, does not export MIBK.

Before the Mitsui plant outage, MIBK’s price gain had outpaced the increase in upstream acetone prices because of tight domestic supply in China and limited availability of spot imports.

MIBK prices have risen 26% this year to close at an average of $2,010/tonne CFR China for the week ended 8 May.

Upstream acetone prices have gained 11% percent this year to reach an average of $1,050/tonne CFR China for the week ended 4 May, according to ICIS data.

Supply of MIBK in China, which imported just over 20,000 tonnes in 2011, has been curtailed by the extended shutdown of the 20,000 tonne/year MIBK plant operated by Taizhou Petrochemical at Taizhou in Jiangsu province since mid-January. The plant is operating at about 80% of capacity after resuming MIBK output on 2 May.

Still, several market participants said they expect supply in China to remain tight because a maintenance to be carried out by Jilin Petrochemical between May and July could offset any supply increase from Taizhou. This is especially in view of reduced availability of spot cargoes from Japan.

Meanwhile, demand for MIBK from the key rubber chemical and tyre sector, which accounts for about half of China’s MIBK consumption, has risen after Jiangsu Sinorgchem Technology, the nation’s largest rubber chemical additive maker, expanded its capacity.

Domestic MIBK prices in eastern China rose to a minimum of CNY17,000/tonne ($2,694/tonne) ex-works this week, after distributors and producers resumed sales after temporarily suspending offers in the wake of the outage in Japan. Some deals have been done at CNY18,000/tonne EXW, a producer said.

Prices were at CNY15,700-15,800/tonne EXW in mid-April, according to information gathered by ICIS.

Several China-based producers and traders said it was difficult to pinpoint a specific price level this week, because most market participants are closing deals on a “private and confidential” basis and refrained from revealing their settled prices to third parties.

They added that producers and distributors are not only restricting their sales volumes, but are also limiting their sales to long-term customers.

While producers and distributors are focused on raising prices, end-users in the coatings and paint sectors are said to be showing growing resistance to the successive MIBK price hikes.

“It’s true that high prices have driven some end-users to turn to lower-priced alternatives [such as butyl acetate (butac) and methyl ethyl ketone (MEK)],” said a trader.

Demand from the rubber chemicals sector is relatively steady, because rubber chemical manufacturers cannot substitute MIBK with other feedstocks.

Still, near-record MIBK prices have also prompted Sinorgchem to cut its operating rate by nearly 10% to about 85% capacity this month, because the rubber chemicals marker is facing difficulty in fully transferring its feedstock cost increase to its downstream buyers,

“We may cut output again next month, if MIBK prices strengthened further,” a source at Sinorgchem said.

($1 = €0.77 / $1 = CNY6.31)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections