MEK Prices Continue to Fluctuate in 2010    

The narrow fluctuation of methyl-ethyl ketone (MEK, 2-butanone) prices in 2009 was significantly driven by the cost and a lasting sluggish downstream demand. Compared to previous years, in 2009 the prices of imported MEK lost more independence and fluctuated following the small ups and downs of prices of domestically made MEK in most of the time.
   In 2009, Zibo Qixiang Petrochemical Industry Group Co Ltd was China's largest MEK manufacturer. This company's newly-built 80 000 t/a MEK unit in Huangdao, Qingdao of Shandong province was put into production in September 2008. PetroChina Lanzhou Petrochemical Company's 30 000 t/a MEK plant came on stream in September 2009. In addition, Xinjiang Dushanzi Tianli High and New Tech Company Limited's 50 000 t/a MEK plant has not always run at its full capacity, because the market demand was weak and this plant is located in western China and thus has difficulties reaching the eastern Chinese market. PetroChina Fushun Petrochemical Company's two MEK units ran in turn. In 2009, the company mainly operated its 25 000 t/a MEK unit, and its 30 000 t/a MEK unit ceased production in most of the time. Other manufacturers' capacity has always remained stable, and their overall MEK output is not high.

China's capacity and output of major MEK manufacturers in 2009
Company     Capacity, thousand t/a    Output, thousand tons
PetroChina Fushun Petrochemical Company     30+25     28.5
Zibo Qixiang Petrochemical Industry Group Co Ltd     25+80     60.0
PetroChina Harbin Petrochemical Company     30      25.5
PetroChina Lanzhou Petrochemical Company     30+30     35.4
Heilongjiang Petrochemical Co Ltd              12      5.8
Xinjiang Dushanzi Tianli High and New Tech Co Ltd     50     30.0
Taizhou Petrochemical Co Ltd                  30      23.0
CNOOC Zhongjie Petrochemical Co Ltd         30      25.0
Total                                       372     233.2
Source: CNCIC


    As for China's consumption pattern, coatings and adhesives will remain two major consumers of MEK, and their combined consumption of MEK accounts for more than 77% of the national total. In recent years, with the rapid development of construction, building materials, home furniture, advertisement & decoration, automotive and electronic circuits in China, the demand for high-end coatings has been increasing. It is predicted that in 2010, China's demand for MEK will still rise. Of that, coatings will consume 190 000 tons of MEK, processing of lubricant oil consuming 25 000 tons, polyurethane based adhesives 60 000 tons, and other areas about 50 000 tons.
   From 2002 to 2009, China's MEK capacity rose from 97 000 t/a up to 372 000 t/a. China's rising MEK output resulted in a reduced import and an annually rising self-sufficiency rate. Previous importers now turned to source from Chinese MEK manufacturers.
   China's MEK producers can be divided into three groups: PetroChina Company Limited, Sinopec Group & CNOOC, and private enterprises. Since the second half of 2009, as PetroChina Lanzhou Petrochemical Company's new MEK unit was put into production, the layout of PetroChina's distribution system in southern China has changed a little, including that the MEK products produced by PetroChina Lanzhou Petrochemical Company and PetroChina Fushun Petrochemical Company are assigned to PetroChina South China Sales Company to sell but are stored in different storage tank zones. In eastern China, the current sales pattern of the company will remain unchanged. In 2010, PetroChina East China Sales Company began to rent storage tanks in Changzhou, Jiangsu province to move its inventory closer to its mid-and small-sized distributors and consumers, but large consumers can still buy products directly from PetroChina's factories and pay transportation fees by themselves. In addition, Xinjiang Dushanzi Tianli High and New Tech Co Ltd, in which PetroChina is a majority shareholder, still has independent sales right. The product made by PetroChina Harbin Petrochemical Company is not sold by PetroChina's sales company too. Taizhou Petrochemical Co Ltd and CNOOC Zhongjie Petrochemical Co Ltd are two big MEK producers that do not belong to PetroChina. Taizhou Petrochemical Co Ltd has been acquired by Sinopec Yangzi Petrochemical Company (YPC). The raw materials of its MEK unit all come from YPC. And the former Hebei Zhongjie Petrochemical Co Ltd became a holding company of CNOOC on January 1st, 2008. This company has a relatively flexible sales pattern and a larger autonomous pricing right and mainly aims at the northern China and eastern China markets.
   In 2010, amid the conditions of overcapacity domestically, increasing their export volumes is still an important part of some MEK producers' strategy. But the further reduction of China's imports of MEK has become an indisputable fact. Since January 1st, 2010, ExxonMobile Corporation has canceled its direct sales pattern in the Chinese market. It is another major MEK supplier who withdrew from China's market after Royal Dutch Shell Plc did so. So it is predicted that in 2010, China's import volume of MEK will be between 15 000 tons and 20 000 tons, falling by about 50% year on year.
   Since the fourth quarter of 2009, the exports of China's MEK consuming enterprises have rebounded. In 2010, the exports of the customer industries may continue to improve, so their demand for MEK will increase slightly. Despite an increase in orders from overseas, due to the current harsh international competition situation, the exports of China's MEK enterprises are far from plain sailing. In 2010, the overall operating rate of China's MEK plants will probably rise slightly, and the overall consumption of MEK in China will have opportunity to exceed 280 000 tons.
   In summary, the price of MEK will continue to fluctuate narrowly as it did in 2009. It is roughly estimated that in 2010, the lowest price of MEK may be about RMB7 500/t and the highest one about RMB11 000/t.