Fuel Ethanol: Prices Fluctuated within a Narrow Range in March
Introduction: Fuel ethanol prices remained largely stable in China this month. Northeast China witnessed a range-bound ethanol market, with decreased low-price resources. Prices in Shandong softened marginally. Recently, coal-based ethanol entered the market in a rapid manner, while units at ethanol plants began to take overhauls, necessitating focus on the supply and demand in the future.
In March, ethanol plants in Northeast China produced fuel ethanol stably. Though demand for ethanol gasoline lacked drive, fuel ethanol sales were still fairish amid stable demand, leaving no pressure on the fuel ethanol inventory temporarily. There was sound demand for fuel ethanol in Shandong where recent price decreases were mainly caused by lower freight from Northeast China to Shandong. However, as market supply and demand are expected to change, more market players may stay on the sideline.
Fuel Ethanol Prices Fluctuated within a Narrow Range in March, with Local Prices Diverged
Between February and March, fuel ethanol prices in China fluctuated within a narrow range. As of March 10, delivered settlement prices of fuel ethanol in Northeast China were unchanged from late February, while procurement settlement prices in Shandong dropped by RMB 25/mt. Prices at Sinopec refineries were stable from last month, with prices outside Northeast China at RMB 7,300-7,650/mt.
Prices at Sinopec refineries outside Northeast China were RMB 7,300-7,650/mt. Those at PetroChina refineries outside Northeast China were RMB 7,300-7,800/mt. International crude oil prices fluctuated within a narrow range, exerting little influence on fuel ethanol prices. In March, supply and demand were major contributing factors for fuel ethanol market. There were still bullish factors for the market prices. Though fuel ethanol plants produced stably in Northeast China, there was still low inventory. Stable consumptions were seen at major refineries. Recently, prices from independent refineries in Shandong decreased due to lower freight from Northeast China to Shandong with no other influential bearish factors. However, changes in future supply and demand are foreseeable, adding new uncertainties to the prices in mid and late March as well as April.
Supply Changed, As Units at Refineries Took Overhauls.
Since March, refineries in China has begun maintenance of units gradually, dampening market expectations of fuel ethanol demand. In March, refined oil market supply dropped. Though market players should be aware of the possible bearish factors brought about by less-than-expected supply, end demand is still expected to rise in 2023, requiring focus on demand recovery in the future. The international crude oil prices were volatile in March 2023. Despite decreases in the rate, the rate of oil price change was still above 0%. As a result, the prices are expected to remain growing. On the whole, though units at refineries began to take overhauls, fuel ethanol demand remained fairish, owing to sound expectations for ethanol gasoline demand.
Fuel ethanol supply may witness changes in the future. Major producers, including those in Heilongjiang, planned to conduct maintenance shift between late March and April, leading to possible supply decreases. The supply, however, may increase, as coal-based ethanol enters the market. Henan Liyuan Group produced steadily, while Shaanxi Yanchang Petroleum conducted stably trial production and began export sales. Fuel ethanol supply is expected to be abundant in China. Prices may fluctuate within a narrow range in Northeast China under such weak supply pressure.
In a nutshell, fuel ethanol prices are expected to be range-bound in Northeast China, backed by cost and sound supply as well as demand in China in March. In April, some refineries may continue maintenance of units, entailing the focus on specific plans for maintenance at ethanol producers in Northeast China and supply and demand changes caused by the entry of coal-based ethanol into the market.
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