Ethanol Downstream Demand Performed Differently
China’s ethanol prices showed different trends after the Spring Festival. The spot availability was limited at major producers in Northeast China, so the offers increased first and then stabilized. However, the prices in East China and Henan trended weak. Major downstream users replenished their stocks intensively in the first week after the Spring Festival, so the trading atmosphere was tepid last week, and most market participants held a growing wait-and-see sentiment.
The overall supply in South China was stable, and the restarts of some units were delayed. The production of cassava-based ethanol enjoyed the cost advantage, so the operating rate was stable during the Spring Festival. The supply of molasses was limited, while the demand cooled down, so the price of molasses fell to below RMB 1,300/mt. The profit of producing molasses-based ethanol turned positive in January, and most units ran steadily except for the delay of some unit restarts after the festival.
After the holiday, the anhydrous ethanol units at major downstream enterprises in South China ran steadily, and the demand from the chemical industry rose stably. The overall trading atmosphere was tepid affected by the slow recovery of downstream demand. Meanwhile, the crude oil price stayed at a high level, and prices of most chemical products went up, improving the overall cost. Therefore, the buying appetites were average.
Recently, the demand from fuel ethanol and the price of fuel ethanol gave certain support to the ethanol price. Meanwhile, the inventory of the edible and industrial ethanol was limited. Major producers maintained their offers stable. However, with the supply of cassava-based ethanol rising in Henan and East China after the holiday, the prices there trended down, leading to a growing cautious sentiment. The supply in South China will not change much in the short term and some units there will be restarted in March. With the rising prices of cassava, it’s estimated that the cost of producing cassava-based ethanol in South China will increase, so the price will not decline much.
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