Short Supply Propels China Ethanol Price in August

China’s ethanol market prices surged in August, influenced by the environmental protection inspection and supply shortage. On Monday, offers for the ethanol were RMB 4,900–4,950/mt tax included, up RMB 100/mt from last week.

China’s central authorities launched a new round of environmental protection inspection and appointed the inspection team to station Jilin and Shandong Province in August. In Shandong, Shandong Fulaichun Biochemical maintained operation, and only three production lines ran normally. The operating rate was low, and spot resources were tight. Thus, the ethanol offer was pushed up actively by distillers.

In Jilin, Jilin New Tianlong Industrial and COFCO Biochemical Energy (Zhaodong) resumed production last week, but the supply shortage still existed. The units at Jilin Boda Biochemical and Changchun Jiliang Tianyu Biological Engineering were restarted, and distillers mainly focused on contracts. 

Therefore, the spot supply was tight, and the unbalance appeared between supply and demand. Looking ahead, it is estimated that the supply volume of the ethanol will not expand in the short term.

The ethanol market price remained high in East China, which was mainly due to tight spot resources. Furthermore, the continuous procurement from downstream major chemical industries was also a key factor. Considering the cost pressure, the ethyl acetate market price edged up. Almost chemical factories had no arrangement for maintenance, driven by the bullish atmosphere. Thus, factories replenished the feedstock constantly. Earlier this week, the ethanol offers further increased, and some traders held the wait-and-see sentiment towards the market.

The white spirit plants will replenish inventories routinely in late August, but traders from Southwest China had less interest in replenishment due to the growing corn-based ethanol price in Northeast China and North China. During this month, the environmental inspection was carried out by central inspection team in Sichuan. Some distillers were likely to shut down temporarily, but the peak demand has not yet come. Thus, the trading atmosphere was lukewarm in Southwest China’s market.

After consecutive increase, it is predicted that the strong momentum of the ethanol market price will weaken. In brief, the ethanol prices are expected to halt further growth and maintain stability in the near future.