IIR: Oversupply May Widen, Prices May Further Decline
Introduction: In November, the units at the Shandong Chambroad and Zhejiang Cenway experienced maintenance, which impacted market supply. However, social inventory remained relatively sufficient, and downstream enterprises continued to maintain a rigid replenishment, leading to limited fundamental drivers in supply and demand, and market prices remained largely stable. Driven by year-end capital repatriation needs, holders may become more active in offloading in December, with a stronger willingness to sell at lower prices. Given the limited room for improvement in downstream demand, the market may experience a stable-to-weak adjustment trend.
Lack of Positive drivers Weighs on Market Prices
In November, the domestic IIR market experienced limited fluctuations. According to SCI, as of November 26, the price of the 1675N in East China was RMB 13,200/mt, unchanged from the beginning of the month, with the average price being RMB 13,200/mt, down 0.79% MoM. The price of the 232 in East China was RMB 15,650/mt, also stable compared to the beginning of the month, averaging RMB 15,650/mt, down 0.35% MoM. Domestic production was affected by maintenance shutdowns at Shandong Chambroad’s 70kt/a unit and Zhejiang Cenway’s 120kt/a. However, as social inventory remained relatively high during the same period, the maintenance had a limited impact on market sentiment. Downstream application enterprises like tires adopted a watch-and-see sentiment, resulting in subdued demand. The supply-demand imbalance showed little alleviation, leading to a lack of effective market drivers. As a result, IIR prices fluctuated within a narrow range.
Limited Alleviation of Supply-Demand Imbalance Fails to Drive Market Momentum
Unit maintenance had a relatively small impact on the market, and the supply-demand imbalance persisted. From November 11 to 17, Shandong Chambroad’s 70kt/a unit underwent maintenance shutdown. Additionally, Zhejiang Cenway’s 120kt/a unit began maintenance on November 10, which is expected to last around one month. However, the market response remained muted both before and after the maintenance commenced. The primary reasons are twofold. First, the current social inventory was relatively high, making the short-term maintenance period insufficient to significantly affect market supply and unlikely to support price increases. Second, downstream enterprises operated with limited fluctuations, continuing to face rigid procurement demand. Some players adopted a watch-and-see sentiment, resulting in subdued demand. Both producers and traders continued to face sales pressure, while downstream players engaged in bargain-hunting. As a result, market sentiment showed no significant improvement.
Feedstock Prices Remain Low, Providing Limited Cost Support
In November, the market price of feedstock MTBE followed a slight downward trend with minor fluctuations. As of November 26, the average price in major domestic MTBE markets was RMB 4,961/mt, down RMB 39/mt or 0.78% MoM, and down RMB 433/mt or 8.03% YoY. Throughout the month, domestic MTBE supply remained relatively ample. On the demand side, consumption from downstream refineries was relatively steady, while export orders for MTBE remained substantial, lending some resilience against price declines. Prices fluctuated within short cycles without establishing a clear directional trend, making it difficult for costs to drive significant momentum in the IIR market.
Supply-Demand Imbalance May Worsen in December, Putting Pressure on Market Sentiment
Supply and Demand: Around December 10, Zhejiang Cenway’s 120kt/a unit is expected to resume operation, leading to a recovery in market supply. Additionally, imported resources are anticipated to continue supplementing the market, ensuring ample availability. On the demand side, December marks a relatively lull season for downstream production and sales. Operating rates in the tire industry may weaken slightly, exerting pressure on demand. The accumulation of supply-demand imbalances is likely to weigh on market prices.
Costs: In December, the domestic MTBE supply is expected to remain relatively ample. However, demand may weaken due to reduced operating rates at refineries. Nonetheless, MTBE export volumes are projected to remain substantial, keeping domestic spot circulation moderately tight. MTBE prices are likely to follow a slight downward trend with minor fluctuations, further weakening cost support.
Overall, the supply-demand imbalance in the market may intensify in December, while feedstock prices are expected to remain weak, offering limited market momentum. Additionally, as year-end approaches, traders may become more proactive in offloading inventory, potentially intensifying market competition. With a lack of positive drivers, IIR prices are likely to stabilize with a slight downward bias. Taking the East China market’s 1675N grade as an example, the average price in December is projected to be around RMB 13,150/mt.
All information provided by SCI is for reference only, which shall not be reproduced without permission.
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