C4R2-Alkylate Industrial Chain to Improve in August
China’s alkylate prices rose notably in July in the wake of price condition changes, but C4R2 prices went down with bearish expectation. Some alkylate producers cut unit operating rates or shut units down in July, dragging down the commercial volume of alkylate and C4R2 procurement volume. Moreover, profits from alkylate production became negative due to changes in the price condition.
C4R2 and Alkylate Price Comparison
China’s alkylate prices averaged RMB 8,513.29/mt in July 2023, up 20.60% M-O-M. With the increment in operation costs, China’s alkylate prices rose dramatically in H1 July. However, most downstream users adopted wait-and-see attitudes to the alkylate market after the price condition changes, weighing down the demand for alkylate. Accordingly, China’s alkylate prices slipped in mid-July. According to SCI’s data, the operating rate of alkylate industry went down, and the demand for alkylate gradually improved with rising gasoline prices and relatively favorable gasoline demand. Therefore, alkylate supply in some regions even became short, propping up the overall alkylate prices.
In July 2023, China’s average C4R2 price was RMB 4,721.24/mt, down 7.17% M-O-M. According to SCI’s data, China’s C4R2 prices fluctuated downward in July. Most market participants adopted bearish attitudes to C4R2 downstream demand, so the overall C4R2 prices moved downward in H1 July. With impacts of price condition change weakening and rising international crude oil prices, China’s C4R2 market improved somewhat in H2 July.
Overall, the price spread between alkylate and C4R2 enlarged notably in July. China’s alkylate prices went up, as the overall operation cost increased. However, the overall C4R2 prices declined due to bearish demand expectation. According to SCI’s data, the highest price spread once surpassed RMB 4,000/mt.
C4R2 and Alkylate Commercial Volume Comparison
According to SCI’s data, China’s C4R2 commercial volume totaled 582kt in July 2023, up 13.4kt M-O-M. Meanwhile, the commercial volume of alkylate was 577.2kt, down 19.8kt M-O-M. The commercial volume of C4R2 rose, but that of alkylate declined. Accordingly, the demand for C4R2 waned somewhat, notably dragging down C4R2 prices.
Profits from alkylate production underperformed in July 2023.
SCI adopts the alkylation unit profit (tax included) in order to be as close as possible to the actual situation from July, and the monthly average profit was RMB -122/mt in July 2023, down RMB 628/mt M-O-M. Profits from alkylate production underperformed, as the increment in alkylate prices was lower than that in production costs.
C4R2-Alkylate Industrial Chain Forecast
Impacts of changes in alkylate price condition will probably weaken in August, and supply and demand fundamentals may be key price drivers. It is expected that the overall gasoline consumption may be high in August, propping up the demand for alkylate. Meanwhile, the overall alkylate supply is likely to go up, hindering alkylate price increments. As for the C4R2 market, China’s LPG prices may rally in August, supporting C4R2 market. Besides, it is predicted that operating rates of alkylation units may increase. Backed by demand and cost improvements, SCI reckons that China’s C4R2 prices will probably move upward in August.
All information provided by SCI is for reference only, which shall not be reproduced without permission.
Please click "Read more" for the full article.
