Cassava-based Ethanol’s Low Supply Encountered Weak Demand

The cassava-based ethanol price in East China dropped early this week. The price of 95% cassava-based ethanol in northern Jiangsu remained at RMB 5,310/mt (tax included) recently, with the decrement of RMB 20/mt from last week. It was worth noting that the operating rate in East China only reached 28%, and the operating rate in Northeast China fell from 71% in early July to 29% recently. Affected by sluggish demand, market players maintained bearish sentiments in the short term.

The price in Northeast China fluctuated to rise following gradual decrease in the operating rate. The shipment loading price in Northeast China was in the range of RMB 5,300-5,500/mt (tax included), and the port price tax-included in southern Jiangsu arrived at RMB 5,550/mt. Since the recent cassava-based ethanol price in southern Jiangsu remained in the range of RMB 5,450-5,500/mt (tax included), the arbitrage window from Northeast China to East China kept closed. Thus, shipment transactions stayed lukewarm recently.

The operating rate at downstream small and medium chemical industries continued to maintain a low level, exerting an influence on the demand for ethanol. As the main downstream chemical industry, some large ethyl acetate industries finished procurement in early August and consumed the stocks.

Since the supply tightness in Northeast China might continue in the short term, it had little influence on the supply in East China. Moreover, the port price of cargoes from Pakistan arrived at RMB 5,560/mt (based on USD 690/mt CFR China), already dropping away from the price in East China. As for the cost, the cassava-based ethanol production cost reached RMB 5,580/mt (based on the cassava slice price of USD 220/mt FOB Thailand), and distilleries still suffered production loss from mid and late March 2018.

The price in East China may continue to dip in the short term due to the tepid demand. However, the price is unlikely to fluctuate significantly following the support of high production cost of cassava-based ethanol and high-priced resources in Northeast China in the short term.