Ethanol Price in South China may Face a Double Dip

The demand for ethanol fromChina’s downstream white spirits industry trended downward from H2, 2018against the backdrop of the overall dismal macro-economy. According to sources,the procurement of ethanol from small and medium wineries in Southwest Chinadeclined sharply. With the start of crushing season in South China, mostmolasses-based ethanol distilleries are planning to restart, and SCI predictsthat the price may touch bottom again.           

Although the first sugar millin Yunnan started crushing from early November, the molasses-based ethanoldistilleries did not restart as expected. Most distilleries held cautioussentiment, considering the high feedstock price and the lukewarm demand.  

A few molasses-based ethanoldistilleries maintained production from H1, 2018, and the supply hovered atlows. However, the supply still exceeded the demand, thus buyers held strongbearish sentiment. Some distilleries had to shut down units and waited forprice decrease in the new molasses price.   

In Yunnan, most distilleriessold the molasses-based ethanol resources to downstream producers in SouthwestChina due to their cost advantages, which dragged down the molasses-basedethanol price. In Guangdong, sellers showed great interest in the sales of theimported ethanol, and the price dropped for several times. In Guangxi, mostmolasses-based ethanol distilleries maintained shutdowns and held wait-and-seesentiment. Some distilleries showed little interest in restart.