Ethanol Price Declined Slowly in June
From June, China’s ethanol price declined slowly. The demand increased, and producers remained high production enthusiasm with active sales. The production cost of ethanol was at a high level and some production technologies faced profit losses. In July, as the output may decline due to the unit maintenance, the ethanol price may continue the downtrend, while the decline may pare back.
From June, although the demand increased slowly, the ethanol price continued the downtrend. Taking the price in northern Jiangsu as an example, as of June 17, the price of 95% ethanol declined to RMB 7,280-7,300/mt (tax included). On the whole, although the ethanol price continued to drop for a long period, it merely declined by 1.81%. The supply increased slightly faster than the demand, while the cost also gave certain support to the price.
From May to June, the output of edible and industrial ethanol increased, and the output may hit a half-year high in June. Affected by the feedstock supply, the ethanol profit exerted limited impacts on the output. The profits from producing ethanol via different technologies differed. That of cassava-based ethanol was negative from May to June, and that of corn-based ethanol improved from Q1. The profit losses didn’t reduce the output of cassava-based ethanol, and the feedstock orders at some producers will be shipped in July, so they couldn’t arrange production suspension in June. Meanwhile, the output of corn-based ethanol didn’t increase much due to the profits. Some producers suspended production due to lack of feedstock and capital.
In June, the demand from the downstream chemical industries recovered. Some ethyl acetate producers in East China lowered their operating rates while some increased, so the overall operating rate didn’t change much. However, the purchases of ethanol accelerated with 13kt purchased by the major downstream chemical enterprises last Friday. Despite the passable demand, the ethanol price moved down due to the ample supply in Northeast China and high selling enthusiasm.
With the inventory of corn and cassava slice consumed, it’s estimated that the prices of corn and cassava slice will not decline much. Meanwhile, from July to August, large-scale ethanol units in Northeast China will start maintenance in turns, which will give some relief to the supply. However, due to the downstream demand slack season in July, it’s estimated that the ethanol price will likely decline slowly.
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