July Coal-Based Ethanol Price Dropped Below Low Point
Introduction: China’s coal-based ethanol producers successively ended their shutdowns for maintenance in July. With the overall recovery of supply, supply competition intensified again. Some downstream chemical enterprises and enterprises in other industry fields increased their acceptance and consumption of coal-based ethanol. However, the demand for coal-based ethanol from some downstream enterprises in Shandong was still weak. As of the end of July, the market transaction price of coal-based ethanol fell below the low point in April. In the short term, coal-based ethanol producers will maintain stable production, and players need to focus on the test run of new units in August, as well as the price support.
Coal-based ethanol supply rebounded in China in July.
The operating rate of the edible and industrial ethanol industry first mounted up and then slipped in July. As of July 31, the operating rate dropped by 2 percentage points from the end of June. Since July, the supply of edible ethanol has decreased, but the competition for resources used in the chemical industry increased due to the recovery of coal-based ethanol supply. The monthly output of coal-based ethanol in July nearly doubled from June and rose by 44% from April. Hereinto, one certain coal-based ethanol producer resumed production in early July, and the other returned to normal operation in H2 July. There were also enterprises enhancing their operating rates.
Coal-based ethanol mainly went down in July, and the transaction price in Shandong fell below the April’s low point at the end of July.
Since the middle of June, coal-based ethanol prices have decreased. As of July 31, the coal-based ethanol market price in Shandong declined by RMB 630/mt or 9.7%, setting a new low for the year. The price drop was mainly affected by supply and demand. Shandong’s downstream demand was still uncertain. Although the demand fluctuated slightly in July, it was difficult to return to normal levels. In addition, traders and downstream enterprises expected the supply to grow, and players held bearish sentiment. Therefore, some traders sold at low prices in advance. As of July 31, the transaction price in Shandong was RMB 5,900/mt (tax included, delivered), down RMB 420/mt or 6.64% from June 28.
Although some downstream chemical enterprises and downstream enterprises in other industry fields increased their acceptance and consumption of coal-based ethanol in July, the demand in Shandong remained soft. Moreover, the output of coal-based ethanol ramped up, so the producers were active in sales. The plants in Shaanxi had no goods and did not bid in the second half of June. Compared with the prices in Anhui at the end of July, the starting price on July 31 was RMB 5,800/mt, down RMB 400/mt or 6.45% from June 28.
Coal-based ethanol supply may climb first and then stabilize in August, and attention can be paid to the rest run of new units.
In August, the output of the plant in Henan is expected to level off after rising, and other top coal-based ethanol plants have no production adjustment in the short term. In terms of new capacity, the plant in Xinjiang plans to put its unit in a rest run on August 10 and come on stream at the end of August, and the plant in Shandong plans to put its unit in a test run in early August and come on stream around the National Day holiday. Therefore, it is estimated that the new capacity will not affect the market in August, but the market will pay close attention to the progress of the test run. At the end of July, the price of coal-based ethanol delivered to the main consumption areas of East China and South China was slightly lower than that of 95% ethanol, which may attract more downstream chemical enterprises. In recent years, the overcapacity of most downstream chemical products has intensified and profits have declined. On the premise of ensuring quality, downstream chemical enterprises also intend to reduce costs to enhance competitiveness. With the increase in price advantage and the fall below the low point of the year, the room for further decline of coal-based ethanol prices may narrow, but with the high output of the main plants, the sales enthusiasm may be high in early August, so supply competition still exists.
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