MTBE Outlook: Revolution Awaits Prepared for 17 th IMPCA Asian Methanol Conference November 4 6, 2014 Singapore By: Wang Xiaoshu, Analyst (MMSA) Methanol Market Services Asia Manhattan House, 151 Chin Swee Road Level 9 07, Singapore 169876 Phone: +65 6465 2720 E mail: services@methanolmsa.com Today s Main Points Global MTBE capacity remains centered in Asia and China, few additions to capacity in other regions expected China continues to dominate world MTBE production growth MTBE demand comes from gasoline blending, which rose fast historically, and will continue to increase China MTBE net trade remains import-oriented; may become a net exporter in 2015 MTBE is a high-profit methanol derivative Future MTBE Market: revolution in gasoline quality trends expected
Process and Manufacture Simplified MTBE Flow Diagram (Comparing 4 Major iso-c 4= Sources) C 4 ex Gas Plant Isobutane H 2 C 4 ex Refinery ( B/Bs ) Dehydrogenation C 4 ex Olefins Unit ( Crude C 4 s ) C 4 Recovery Butadiene (Raff-1) Isobutylene Dehydration MTBE Operations MeOH Purification, Recycle MTBE Residual C 4 Isomers (Raff-2) TBA ex PO/SM H 2 O MTBE Applications Gasoline Blending Boost Gasoline Octane Value Antiknock Back Crack for Isobutylene Production Also, Feedstock of MMA, Butyl Rubber, Tert-butylamine Various Industrial Applications Extract Solvent Reaction Medium Polymerization Medical Procedure
Global MTBE Overview South America 2014E MTBE Capacities by Region -000-metric tons Europe Mexico China US Other ME Asia Qatar Iran SaudiArabia Russia China Japan Taiwan South Korea Malaysia Singapore Indonesia Australia New Zealand Other SEA India Other South Asia Russia Saudi Arabia Iran Qatar Oman Other ME US Canada Mexico South America Europe Africa Total Capacity : 24,292 thousand metric tons (4Q2014 MMSA Update) MTBE Use in Regions North America ~12% Developed as gasoline additive; removed the use in gasoline from 2000 as hazard concern about environment and health Isobutylene production Export: South America 2013 Methyl Tert-Butyl Ether Export from US Venezuela Chile Middle East ~15% Antiknock in lead-free gasoline Export Mexico Japan Limited capacity addition in North America and Middle East in the forecast
MTBE Use in Regions Europe ~15% Market grew along with US Switching Capability with ETBE Export 2014E European MTBE Capacity Distribution -000- metric tons Hungary Poland Romania Austria Former Yugoslavia France Czech Republic & Slovakia Market becomes strong since 2013 Increasing Production Increasing Consumption Bulgaria United Kingdom Sweden Portugal Italy German Federal Republic Greece Netherlands Total Capacity : 3,368 thousand metric tons MTBE Use in Regions
China Dominate Capacity Growth 30000 MTBE Production Capacity 25000 20000 15000 10000 5000 0 2009 2010 2011 2012 2013 2014E 2015E 2016E 2017E 2018E 2019E China Rest of World China MTBE supply rises quickly to meet growing demand 14,000 Methyl Tertiary Butyl Ether Capacity for China 12,000 10,000 Thousand Tonnes 8,000 6,000 4,000 2,000-2009 2010 2011 2012 2013 2014E 2015E 2016E 2017E 2018E 2019E
China MTBE demand increases rapidly About 90% of the demand comes from gasoline blending Average blending ratio is increasing year by year: 2.25% in 2002, 2.59% in 2006, 6.08% in 2010 Not to exceed ~14.8% Vehicle fuel supply pressure, combined with refined product quality and emission requirements improvement will gradually increase MTBE blending percentages and consumption, leading to steady MTBE demand growth As C4 resources continue to increase in China, downstream demand for MTBE chemical derivatives will also materialize substantially China MTBE net imports continue despite increased domestic production 800 China MTBE Import&Export 000 tons 600 400 200 0 2010 2011 2012 2013 2014E Import Export
Dynamic MTBE Trade Pattern Net exporter till 2008 Since 2009, a dramatic growth appeared in MTBE demand, the overall situation turned to short supply Net trade has been positive since After China developed ASEAN free trade policies, MTBE import markets became much more active, MTBE imports increased significantly By 2015, China is likely to become a MTBE net exporter again, under the condition of another round of refinery based expansion of MTBE capacity happen MMSA closely monitoring new project developments MTBE prices correlate better with refined product pricing than methanol pricing 10000 China Domestic Naphtha vs. MTBE vs Methanol Prices 9000 Domestic Price (RMB per metric ton) D 8000 7000 6000 5000 4000 3000 2000 1000 0 Sep-14 Aug-14 Jul-14 Jul-14 May-14 May-14 Mar-14 Mar-14 Jan-14 Dec-13 Nov-13 Oct-13 Sep-13 Aug-13 Jul-13 Jun-13 May-13 Apr-13 Mar-13 Feb-13 Jan-13 Dec-12 Nov-12 Oct-12 Sep-12 Aug-12 Naphtha MTBE Methanol
Gasoline also impacts MTBE prices 12000 Oil vs. Gasoline vs. MTBE Prices 1200 11000 1100 omestic Price (RMB per metric ton) D 10000 9000 8000 7000 6000 1000 900 800 700 600 Brent Oil Price (RMB per barrel) 5000 500 4000 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Gaosline MTBE Brent Oil Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 400 Methanol affordability for MTBE is the highest 1400 Methanol Volume vs. Value - China Mid to Late September'14 ethanol "Affordability," USD/MT Me 1200 1000 800 600 400 Average Price for East China, Ex-Tank, Average August '14; 1 USD = 6.15 CNY Average Price for East China, Ex-Tank, Average September '14; 1 USD = 6.14 CNY Chloromethane MMA AA MTBE 200 DME Formaldehyde Gasoline Olefins Blending Methylamines (equal energy) 0 0 6000 12000 18000 24000 30000 36000 Cumulative Consumption of MeOH in China, 2014E (Oct '14 Update), -000- tons, Select
China MTBE Economics MTBE margins fluctuate according to C4 feedstock and methanol prices Octane blend values eventually ent drive MTBE price changes Closely tied with oil and gasoline prices Compared to other methanol derivatives, MTBE production creates highest margins, which makes it a high-profit product Rising i cost: consumption tax National Tax Administration announced a new policy: from 1 Jan 2013, consumption tax is applied on liquefied petroleum products, including additives such as MTBE, and aromatics. SAT Announcement No.33-2014 Margins excellent for MTBE made in Middle East since 2007 USD per metric ton 1,500 1,300 1,100 900 700 500 300 100 MTBE Prices and ME Butane Margins FOB Singapore Basis 100 300 Apr 05 Dec 04 Aug 05 Dec 05 Aug 08 Apr 08 Dec 07 Aug 07 Apr 07 Dec 06 Aug 06 Apr 06 Cash Cost CFR Singapore Dec 08 Apr 09 Aug 09 Dec 11 Aug 11 Apr 11 Dec 10 Aug 10 Apr 10 Dec 09 MTBE FOB Singapore Apr 12 Aug 12 Dec 12 Apr 13 Aug 13 Dec 13 Apr 14 Aug 14 Cash Margin ME Butane Based Reinvestment Margin USD per mt
MTBE Future: Opportunities and Challenges coexist in China With the rapid growth of gasoline apparent demand, MTBE demand will keep increasing in China in the next few years Margins encourage more project investment Access to C4 feedstock must be considered Market revolution is underway Facilities upgrade to expand capacity to make cleaner fuels New national gasoline standard (National Std V) issued, sulfur content in gasoline to be further reduced, requiring octane Gasoline blending regulation Alternative: Isooctane Rising cost from feedstock market and tax Competitive Fuel Market Alternative Fuel Demand - Global 25,000 Methanol Demand for Developing Uses by Region (-000- Tons) 20,000 15,000 10,000 5,000-2009 2010 2011 2012 2013 2014E 2015E 2016E 2017E 2018E 2019E Asia North America South America Europe Russia Middle East Africa
Alternative Fuel Development in China DME: high cetane value, less pollution, easy to liquefy Blending : LPG (20%), Diesel Direct Combustion GB 25035-2010 2010 DME for City Gas Use issued in September 2010 and implemented from July 2011 Preparation of standard for LPG-DME blending has completed Methanol Gasoline: Higher combustion efficiency, Lower pollutant emission; Lower cost M15: Shaanxi, Shanxi, Shanghai M85: Hebei, Guizhou M100: Shanghai Other ratio: Hebei (M5), Zhejiang (M5), Shandong (M25) GB/T 23799-2009 M85 Methanol Gasoline for Vehicle Use issued in May 2009 and implemented from December 2009 M15 National Standard has finished drafting, but yet not issued Methanol Gasoline Development in China MeOH Gasoline Blending Specification Development in China Specification Type Region M5 M15 M25 M85 M100 Other Nationwide * Provinces Fujian * Gansu * M30 Guizhou * * Hebei * Heilongjiang * Jiangsu M45 Liaoning i * Shaanxi * * Shandong M30 Shanghai * Shanxi * * * * Sichuan M10 Xinjiang * * Zhejiang * M30, M50
Alternative Fuel Development in China China Methanol Gasoline Pilot Projects Gansu, M15: Pingliang Shaanxi, M15 M25 M85 M100: Xi An, Baoji, Hanzhong, Xianyang, Yulin Shanxi, M15 M85 M100: Yuchen, Changzhi, Jinzhong Shandong, M25* M30: Weifang Guizhou, M15, M85: Guiyang, Qingzhen, Yuping, Guiding Henan, M15 M85 Shanghai, M85 M100: Minhang Zhejiang, M15: Huzhou, Hangzhou, Jiangxing, Taizhou, Quzhou, Jinhua * Methanol Vehicles Pilot Project by MIIT Provincial Trial Methanol Diesel Today s Main Points Global MTBE capacity remains centered in Asia and China, few additions to capacity expected from other regions China continues to dominate world MTBE production growth MTBE demand comes from gasoline blending, which rose fast historically, and will continue to increase China MTBE net trade remains import-oriented; may become a net exporter in 2015 MTBE is a high-profit methanol derivative Future MTBE Market: revolution in gasoline quality trends expected
MMSA Global Insight, Asian Perspective 11th Year of Operation, based in Singapore Employee owned, Independent Dedicated Consultants with over 45 years of Methanol industry experience: Singapore, Shanghai, Frankfurt, Seattle Multi-Client t Services Methanol & Derivative Analysis Methanol, Formaldehyde, Acetic Acid, MTBE, MMA, Energy Use in global detail Methanol Notes Topics of relevance in brief, weekly MMSA Weekly Methanol Analysis Global market analysis and price assessment every Friday Singapore time China Monthly Methanol Analysis (CMMA) Project Services Market and Technical Due Diligence Support Bankable Project Assessments, Valuation IMPCA Asian Conference Singapore Nov 4-6 14 Methanol Policy and Technology Congress Frankfurt Dec 2-4 14