Mi Duo, Zu Siya
Methyl tertiary butyl ether (MTBE) is ideal for the production of unleaded, high octane, oxygenated gasoline and has been used worldwide as a gasoline additive. China’s MTBE market has been mature at present and will be hugely impacted by the growth of new energy vehicle consumption.
Severe overcapacity
As MTBE industry entry barriers are low, its marketization is high, most products are almost same and hence the competition is very fierce. In 2021. China’s MTBE capacity reached 23.71 million t/a, and the output was 13.0367 million tons. The overcapacity is very severe.
China’s MTBE capacities are from the Big Three, teapots, and deep-processing enterprises. The total capacities from PetroChina, Sinopec and CNOOC totaled 5.98 million t/a in 2021, accounting for about 25% of the national total.
Sinopec has 2.93 million t/a, PetroChina 2.5 million t/a, and CNOOC 550 thousand t/a. The independent refineries have 6.09 million t/a, taking about 26% of the national total. Deep-processing enterprises have 11.18 million t/a, account for 47%. Sinochem Holdings has 460 kt/a.
By regions, Shandong has 41% of teapot refineries’ MTBE capacities, reaching 9.65 million t/a. East China takes 14.7% and Northeast China 13.7%.
China’s MTBE capacity was expanding from 2017 to 2021. The growth however started to slow down since 2018, due to overcapacity situation in China and the impact from other markets. The future growth of MTBE is anticipated to be slackened further. Please see Chart 1 for China’s MTBE capacity trend from 2017 to 2021.
Chart 1 China’s MTBE capacity trend, 2017-2021
Because of the supply excess, most of the new capacities are built by refineries for captive use. The expansion in 2022 is expected to be 660 thousand t/a, pushing China’s total MTBE capacity to 24.37 million t/a, with a YoY growth of 2.8%.
Consumption in 2022 will continue to grow
China’s MTBE production in 2021 was 13.037 million tons, up 8.1% YoY. Despite of many maintenances, the refined oil output increased greatly on refineries’ high operating rates, thanks to the control of Covid-19 and the rapid recovery of refined oil prices. The consumption of MTBE and other gasoline raw materials hence has risen simultaneously, further stimulating the production enthusiasm of MTBE manufacturers.
Although the consumption of MTBE dropped in 2020, the market recovered in 2021, with the consumption reaching 13.8576 million tons, up 14.50% YoY. The proportion of chemical-based consumption declined to 5% and the proportion of oil blending consumption went up to 95%. Table 1 shows China’s MTBE supply and demand from 2017 to 2021.
The main economic indicators of the oil blending MTBE in 2021 have recovered to the level before the pandemic. With industrial restructuring and further promotion of new energies, the growth of gasoline demand may slow down further in China. Its refining capacity will continue to expand in 2022, and so will the refined oil production. On the whole, China's refined oil market will remain to be imbalanced in 2022, somewhat restricting refined oil prices from increasing.The gasoline production is expected to grow further in 2022, and the demand for MTBE will continue to rise. The consumption of oil blending type MTBE is anticipated to go up to 13.24 million tons in 2022.
The major consumers of MTBE from chemical sectors are butyl rubber and carbon tetra method MMA. Although its market volume is still expected to increase slightly in the future, the substitution of tert-butyl alcohol for MTBE cracking in the production of high purity isobutene limits the growth of chemical-based MTBE. The total MTBE consumption from chemical sectors is expected to be around 800 thousand tons in 2022.
The total demand for MTBE will be about 14.06 million tons in 2022, on the heels of gasoline production increase and the end consumption recovery.
Imports might drop in 2022
China’s MTBE import volumes were low during 2017 to 2019 as domestic supplies were ample, domestic product quality was improving, and imports’ price advantages weakened. However, in 2020, the import volume hiked as the imports were priced lower than domestic market. In 2021, the import amount dropped again as the global MTBE prices rose.
The MTBE export volumes were going up from 2017 to 2019 due to fierce competition in domestic market and the promotion of ethanol gasoline. The year 2020 saw the export amount declining, and there was no export in 2021.
Table 2 shows detailed MTBE imports & exports from 2017 to 2021.
China imported 474.5 thousand tons of MTBE in 2021, down by 41.46% YoY. Among all import origins, Saudi Arabia ranked No.1, taking 32.1% of the total (152.6 thousand tons); Korea 14.16%, and UAE 13.17%. See Chart 2 for details.
Chart 2 China’s MTBE imports, 2021 (by origins)
There were three import trading modes for MTBE importing in 2021, with general trade taking 84.35% of the total, inbound and outbound goods from bonded supervision sites taking 14.56%, and processing trade with imported materials 1.09%, as shown in Chart 3.
Chart 3 China’s MTBE imports, 2021 (by trading modes)
As the Covid-19 influence is waning globally and domestic MTBE supply is abundant, the import amount in 2022 is anticipated to drop by 15.7% (400 thousand tons) from 2021.
Rising sales of new energy vehicles will hit MTBE demand
The national ethanol gasoline promotion has slowed down, and the threat to MTBE has been diminished. Meanwhile, China has proposed to achieve carbon peaking by 2030 and carbon neutrality by 2060, meaning the beginning of a transition from the fossil energy to non-fossil energy. Most fossil fuels will be washed out in the future. The clean and low-carbon development will be our goal, and diversified development routes will become mainstream. With the increasing awareness of environmental protection, stronger supporting policies, and the progress of new energy vehicle technology, China’s new energy vehicle production and sales will increase, and the replacement of traditional oil products will become more and more obvious, hence hugely impacting the market of MTBE.
