Demand for Ethanol Changed Rapidly
This week, the demand for ethanol trended down rapidly, while the demand for ethanol from the disinfection field was relatively saturated. Moreover, the demand for ethanol from the chemical industry went up slowly, and the demand from white spirits field wasn’t released. Therefore, most participants in China’s ethanol market stayed on the sidelines.
Remarks: W-O-W change is between Feb 20 and Feb 13, and the Y-O-Y change is between Feb 20, 2020 and Feb 20, 2019.
Analysis: This week, China’s ethanol prices declined rapidly, particularly in East China and Central China. According to SCI’s statistics, as of February 20, 95% ethanol prices in northern Jiangsu were RMB 5,800/mt, down 8.66% W-O-W and up 11.75% Y-O-Y. There are two factors pushing down ethanol prices. On the one hand, the supply increment was larger than the demand increment; on the other hand, affected by the recovery of long-distance transport, the arbitrage space from Northeast China to many areas enlarged, giving pressure to the resource sales in northern Jiangsu.
Market supply:
Remarks: W-O-W change is betweenFeb 20 and Feb 13, and the Y-O-Y change is between Feb 20, 2020 and Feb 20,2019.
Analysis: After the Spring Festival,China’s ethanol supply continued rising. According to SCI’s statistics, as ofFebruary 20, the daily operating rates of 95% ethanol reached 43.38%, up 2.57%W-O-W and up 8.77% Y-O-Y. The main factor affecting the continually increasingoperating rates was profit. Although 95% ethanol prices trended down, thecorn-based ethanol, cassava-based ethanol and molasses-based ethanolenterprises all maintained the profits. Taking corn-based ethanol enterprisesas an example, the profits in Jilin was RMB 433.75/mt, hitting the highestlevel from July 2019.
Remarks: According to SCI, the samples were selected from the plants with effective capacity.
Analysis: At present, most enterprises restarted their units. The operating rate of 95% ethanol was highest in Northeast China, because the units in Northeast China operated normally during the Spring Festival holiday according to the custom. In East China (Shandong included), the number of enterprises restarted in Shandong ranked first. Among the 36 enterprises in East China (Shandong included), 15 enterprises were shut down, and 7 more enterprises were restarted than the Spring Festival holiday.
Remarks: W-O-W change is between Feb 20 and Feb 13, and the Y-O-Y change is between Feb 20, 2020 and Feb 20, 2019.
Analysis: As for the main downstream ethyl acetate, the work resumption was accelerated. According to SCI’s statistics, As of February 20, China’s ethyl acetate operating rates were 36.11%, up 16.83% W-O-W and down 10% Y-O-Y. In addition, the logistics and the recovery of end demand both affected downstream work resumption.
Market transport: At present, the ethanol transport was smooth except for Hubei Province. Beside, supported by the zero-toll policy, the ethanol freight trended down, and the freight from Northeast China to Shandong declined by RMB 100/mt. The logistics recovery is beneficial to feedstock procurement, work resumption and resource sales. In the future, the ethanol freight will inch down.
Market forecast: In terms of supply-demand fundamentals, cassava-based ethanol supply will rise in March, because some plants started ordering goods. Therefore, the operating rates will be largely stable in March, and some plants will restart their units from March to April. As for the demand, the demand for ethanol will trend up slowly, and the demand from the disinfection field will maintain a growth. During the Spring Festival holiday, the sales of white spirits were sluggish, and the procurement for ethanol will be later than expected. SCI reckons that ethanol prices will continue decreasing slowly in the short term, and the prices will hit the bottom in the long term.
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