Low Supply may Lend Support to Ethanol Price after Holiday

After China’s Spring Festival holiday, the supply of ethanol in most regions did not increase as expected. The smooth sales before the holiday, coupled with the low operating rate in the industry may lend great support to the ethanol price in the medium-and-long term.          

The ethanol prices in most regions remained largely stable after the Spring Festival holiday. However, distilleries showed more confidence in the price for the future in 2019, which was mainly boosted by the cost and low supply.    

In East China, the costs of cassava slice at cassava-based ethanol enterprises picked up somewhat. The dealing price of cassava slice was $205/mt FOB Thailand before the Spring Festival holiday, and that moved up to be $209-210/mt FOB Thailand, mainly backed by the exchange rate and the strong demand in Thailand market. According to the latter price, the production cost cassava-based ethanol distilleries was roughly calculated at RMB 5,256/mt. Moreover, the operating rate of cassava-based ethanol units in East China during the Spring Festival holiday in 2019 was only 11%, and a few distilleries maintained productions during the holiday.    

In Northeast China, the supply of corn-based ethanol during the Spring Festival holiday in 2019 was lower than that of last year. The stock volume at corn-based ethanol distilleries before the holiday was around 120,000mt, and that remained unchanged after the holiday. Besides, more than 10,000/mt ethanol shipments needed to be delivered in February. Therefore, distilleries in Northeast China had no sales pressure and did not intend to cut prices to promote sales.    

According to SCI, distilleries that maintain shutdowns still hold wait-and-see sentiment for the future. Some players also maintain bullish sentiment on prices in end-February and March, considering the new round of procurement from downstream chemical enterprises.