April Fuel Ethanol Price Rose After Bottoming Out
Introduction: China’s fuel ethanol prices bottomed out in April. As of April 24, the average price of fuel ethanol in Northeast China rallied by RMB 125/mt or 2% from March 29. After the May Day holiday, demand is expected to weaken, but if the unit maintenance is conducted as scheduled in H1 May, the supply will prop up the fuel ethanol price.
Fuel ethanol prices rebounded after bottoming out due to increased bullish factors.
In April, China’s fuel ethanol prices fluctuated after rebounding from the bottom level. As of April 24, fuel ethanol prices in Northeast China were RMB 5,950-6,300/mt, and the average closing price increased by RMB 125/mt or 2% from March 29. The low-end price of fuel ethanol in Shandong was RMB 6,330/mt, up 4.6% from March 29. During the month, the price decrement in Shandong was faster than that in Northeast China, and the difference of the average price in early April between the two markets reached the lowest level of RMB 110/mt in recent years.
On the demand side, the demand for fuel ethanol rebounded in April, supported by holiday increases. Moreover, the economics of ethanol addition was higher than that of adding other components, which also boosted end demand. As the temperature warmed up, residents traveled more. In addition, the Qingming Festival holiday in early April and end users’ restocking in H2 April for the May Day holiday also drove the increase in end demand. As of the week ended on April 24, most downstream refineries stocked up on ethanol to higher levels. On the supply side, the orders of major ethanol producers in Northeast China from state-owned refineries increased in April, and some major producers released maintenance plans due to the heavy cost pressure. Therefore, fuel ethanol offers ascended. The instability of other supply in mid-April also boosted market expectations, causing prices to move up.
In May, players need to pay attention to whether the supply side will underpin the price to stabilize and inch up.
China’s fuel ethanol demand will see decreasing bullish factors, and the supply change will be the main factor influencing the fuel ethanol price.
In terms of demand, downstream purchases are expected to decrease in May compared with April due to the high inventory. In terms of supply, the fuel ethanol output is reckoned to shrink in May as some producers will take maintenance in advance and other supply will also decrease. Hereinto, two production lines at a certain major producer in Heilongjiang will experience maintenance at the end of April for one month, and the maintenance time of producers in Jilin is to be determined. In addition, ethanol producers will experience heavy maintenance from June to August. As for industrial ethanol, the supply is predicted to fall in May due to the maintenance in Anhui and Shaanxi. The 95kt/a line in Hunan is planned to come online in the middle of May, and the 500kt/a capacity in Shandong may be put into a test run in June, which will exert limited impacts on the fuel ethanol market.
To sum up, both demand and supply in China’s fuel ethanol market will decline in May, and unclear shutdown arrangements for some producers lead to uncertainty about supply support. Judging from the maintenance plan that has been determined so far, there is a high probability that the support side will hold up the fuel ethanol price. Weak demand may hinder the price rise, but the probability of a decline is unlikely.
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