Asia octane: Key market indicators for June 21-25

　　Asian octane blendstock markets are facing headwinds in the June 21-25 trading week from poor demand in the naphtha, MTBE and toluene markets, while heavy isomer mixed-xylene inventories and increasing supply are expected to dent sentiment further.

　　Naphtha** The Asian naphtha complex has seen a slow start to buying activity for the H1 August delivery cycle as buyers were seeing ample supply and competitive pricing by sellers, sources said.

　　** Olefin margins were expected to take a hit with the startup of new crackers, particularly with two new crackers in Yeosu ramping up operations from H2 June, sources said. While this has boosted overall demand for naphtha, the resultant crunch in olefin margins would lead some crackers to reduce run rates, in turn capping demand for cracker-feed naphtha.

　　** The key CFR Northeast Asia ethylene spread to benchmark C+F Japan naphtha cargo as such has fallen below the typical breakeven of $250/mt for integrated producers; it was assessed at $227.875/mt June 18, down $32.625/mt mt day on day, Platts data showed. This is the first time the ethylene-naphtha spread has fallen below $250/mt since May 11, 2020 when it was $204/mt, S&P Global Platts data showed.

　　** The Singapore reforming spread — the difference between Singapore 92 RON gasoline and Singapore naphtha derivative — narrowed to $9.35/b June 18 from $9.98/b on June 14 on a weaker gasoline complex, Platts data showed.

　　MTBE** The FOB Singapore MTBE marker was expected remain on a downtrend this week as ongoing movement restrictions in Southeast Asia erase hopes of demand-side support in the near term.

　　** Moreover, previously robust demand for the high-octane blendstock from China was expected to dissipate after the country’s new consumption tax on mixed aromatics was implemented June 12.

　　** Against the backdrop of tepid demand, Formosa Petrochemical Corp. was reported to have issued a tender offering two 5,000 mt MTBE cargoes for loading over July 27-31 and July 31-Aug. 3 from Mailiao, Platts reported earlier.

　　Isomer-MX** Fundamentals in the isomer-mx complex will likely remain weak this week, with China’s near-term import demand outlook lackluster amid a lack of domestic blending activity.

　　** The lack of blending activity has kept July and August import demand uncertain, particularly as inventories from East China ports are expected to rise, with up to 90,000 mt of isomer-mx slated to arrive over late June-early July, according to industry sources.

　　** Inventories of isomer-mx in East China rose to 49,800 mt June 18 from 42,700 mt a week earlier, Platts data showed.

　　Toluene** The Asian toluene market was likely to remain bearish over June 21-25 as tepid import demand from China amid heavy domestic supply continues to weigh on the complex.

　　** Adding to the bearish pressure, adjacent aromatics markets such as benzene were expected to further decline this week, further squeezing margins for toluene disproportionation plants and denting consumption prospects.

　　** The bearish fundamentals had already intensified selling pressure late last week, with the FOB Korea toluene marker falling 1.75% day on day to $729/mt June 18, the sharpest one-day fall since June 11. The FOB Korea toluene marker had fallen 4.08% to date in June as of June 18, Platts data showed.

　　Ethanol** A recent dip in ethanol prices was expected to drive the Asian ethanol complex this week, with buyers in the Philippines eyeing the price retreat as an opportunity to secure imports for the September-October delivery cycle.

　　** The dip in ethanol prices came amid forecasts of better corn yields, which emerged as wet weather across much of the corn belt raised hopes for better corn production.

　　** Bearish ethanol production data also weighed on the blendstock. Ethanol production remained at over 1 million b/d in the week ended June 11, despite inching down 42,000 b/d from the week before, US Energy Information Administration data showed June 16.

　　** Prices of US ethanol delivered to the Philippines as such fell to $660/cu m June 18 from $701.33/cu m on June 11, Platts data showed.