Ethanol Arbitrage Window Narrowed

In Northeast China, the corn price rose rapidly. Moreover, the decreases in the corn-based ethanol price were below the market expectations, given that the stocks were concentrated in limited distilleries. Therefore, the arbitrage window from Northeast China to North China narrowed recently. 

Market players held strong bearish sentiment on the ethanol price in Northeast China in the wake of the high supply level and the severe road delivery conditions in winter. However, the price decrement of the corn-based ethanol in Northeast China was only in the range of RMB 50-100/mt, especially under the backdrop of the stable ethanol price in East China.   

The recent delivered price through road transport from Northeast China to southern Jiangsu was around RMB 5,450/mt, and that through ship transport was about RMB 5,400/mt. Yet, the dealing prices of large orders at local distilleries in southern Jiangsu fluctuated in the range of RMB 5,430-5,450/mt.      

In November, the operating rate in Northeast China reached 82%, and the supply of corn-based ethanol hit its high within 2018. However, the price did not fall back rapidly, mainly supported by the feedstock price and the demand from downstream chemical industries.       

On the stock side, the corn-based ethanol distilleries in Northeast China held low stocks despite the sufficient supply.      

In East China, the rigid demand from downstream major chemical industries remained stable, while the demand from small and medium ones kept relatively lukewarm due to the environmental protection supervision.

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