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China: Will MEK Trade Volumes Increase alongside Higher Prices?

https://www.chemnet.com   Jul 30,2010
MEK market was bearish early in July. Some MEK producers stopped production and held low inventories, so their offers were firm while users slowed purchasing, leading to stalemated transactions. Late last week/early this week, producers lifted producers and then traders and downstream users had to raise buy ideas, but few deals were reported yet.


MEK producers said domestic supplies decreased since a large number of local output went to higher-priced overseas market. Shandong Qixiang reported over 3,000 tonnes of exports in July. Hebei Zhongjie exported more than 1,000 tonnes to overseas market and would have little availability in the internal market. Meanwhile, the closure of naviation caused by oil leakage at Dalian Port hampered the delivery of Fushun PC's goods. The producer recently limited sales with low inventories. Xinjiang Tianli would shut down its 40,000 tonnes/year unit for 40-day maintenance in August and currently the producer held low inventories and limited sales. Therefore, domestic MEK offers were revised up by CNY300-400/tonne to CNY8,300-8,500/tonne.


Most domestic traders kept inventories at low levels or even zero on lower operating rates of downstream plants at the end of June and decreased chemical prices, so they were shocked by the sudden MEK price rise this week. Some traders said the price rise might depress downstream users further but on the other hand, the MEK prices already hit a level higher than acetone price by CNY3,000/tonne, leaving little upward room. Accordingly, most traders were cautious.


Some downstream users just covered immediate requirements with low operating rates and low inventory levels amidst the traditional off-season. They showed resistance on the high MEK prices and turned to buy substitute solvents which were pegged at CNY3,000-5,000/tonne. Hence their MEK consumption decreased sharply.


In a nutshell, despite a price rise, trade volumes had little improvement. It is expected domestic prices will edge up in short term as upstream producers may lift offers on limited inventories.
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