Fuel Ethanol Output & Price Rose in Q1
In Q1, 2022, with the rising crude oil price, ethanol gasoline enjoyed stronger cost advantage, and the demand for fuel ethanol improved in Q1, pushing up the price. Therefore, producers had high production enthusiasm and the ethanol output in Q1 improved from last quarter and Y-O-Y.
In Q1, 2022, the prices of fuel ethanol, feedstock and related products increased from last quarter. The international crude oil price showed an uptrend, with the average price of Brent and WTI rising by over 20% from last quarter. The correlation between crude oil and fuel ethanol declined Y-O-Y. In Q1, the price and output of fuel ethanol increased both from last quarter and Y-O-Y.
In Q1, 2022, China’s fuel ethanol price fluctuated upwards and hit record highs. The average price of 99.5% fuel ethanol in Northeast China in Q1 was RMB 6,905.42/mt, up 2.44%, supported by the cost and demand. As for the cost, the corn price in Northeast China increased by 2.79% in Q1 from last quarter. In March, the international crude oil price hit a record high since April 2008, which was beneficial to the development of bio-energy.
What’s more, the impacts from the supply and demand side were summarized as follows. 1. In Q1, the output increased both from last quarter and Y-O-Y. The profit of the fuel ethanol industry improved, and producers had high production enthusiasm. In addition, the demand from the downstream ethanol gasoline industry also supported the price. 2. The import volume declined in Q1. The prices in the main origins of imported resources, such as the U.S. and Brazil, were at highs, so the imported fuel ethanol was rarely seen the arbitrage window closed. 3. The consumption volume in Q1 increased first and then declined, and the total consumption volume increased Y-O-Y but declined from last quarter. The high international crude oil price supported the development of bio-energy while the transportation was limited. Therefore, the fuel ethanol consumption volume increased first and then declined in Q1.
In Q1, 2022, the output of fuel ethanol hit a record high since 2020. According to SCI, China’s fuel ethanol output was 815.4kt in Q1, 2022, up 30.19% Y-O-Y. The output increment was due to the increased demand and improved profits. The gross profit was RMB 85/mt in Q1, 2022, while it was negative in Q1 and Q4 of 2021.
According to China’s customs, in the first 2 months of 2022, China’s total ethanol import volume was 40.72mt, while it was 13.9kt in Q4, 2021. It’s estimated that the total import volume in Q1, 2022 will decline greatly from last quarter. In the first 2 months of 2022, the import volume of fuel ethanol was 27.662mt, down 99.98% Y-O-Y.
The high international crude oil price supported the development of bio-energy, while the monthly fuel ethanol consumption volume showed different trends in Q1 affected by the limited transportation. According to SCI, the total consumption volume of fuel ethanol in Q1, 2022 was 782.5kt, down 7.24% from last quarter while up 7.19% Y-O-Y. The consumption volume in January was passable, while the natural days were less in February and the transportation was limited in March, so the consumption volume showed a downtrend in Q1.
In Q2, it’s estimated that the output will inch down. In April, output losses will be seen in Northeast China as producers in Jilin will hardly resume production and the sales of fuel ethanol will decline. The demand will keep declining in April while the trend is not sure for May and June. As for the price, it’s estimated that the cost pressure will be eased limitedly, while the price may fall affected by the demand.
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