Coal-Based Ethanol: Prices Rebounding from the Bottom
Introduction: Since mid-November, domestic coal-based ethanol prices have been slowly recovering from low levels, with the pace of increase accelerating in early December. Driven by rising domestic fermented ethanol prices, demand for coal-based ethanol in chemical sector orders has shown growth. In the first week of December, transaction prices at major coal-based ethanol plants increased by RMB 50-100/mt compared to the previous week. Some enterprises reported acceptable post-increase sales, and prices in distribution areas also rose significantly. Market supply fluctuations in December are expected to be limited. Support is anticipated from producers' order backlogs and demand from certain downstream chemical sectors, but the sustainability warrants attention. Overall, market prices are projected to remain stable and firm.
Slow Rise After November Bottom, Gains Increase in Early December
Domestic coal-based ethanol prices have been gradually rising from low levels since mid-November, with gains expanding in early December, coinciding with rising domestic fermented ethanol prices and increased demand for coal-based ethanol in chemical industries. In early November, both domestic fermented ethanol and coal-based ethanol prices were at low points. The rapid rebound in corn prices in Northeast China during November bolstered market expectations for higher ethanol prices. Downstream users’ buying interest increased by mid-month. As EXW prices for Northeast China-sourced ethanol recovered and outbound freight costs rose, the price advantage of coal-based ethanol became apparent, leading to a rebound supported by increased order volume. From the producer perspective, transaction prices in the week ending December 5 were up RMB 100-150/mt compared to the November low.
Coal-Based Ethanol Supply Largely Stable; Fermented Ethanol Price Strength Provides Support
On the supply side, the coal-based ethanol supply in December is expected to show limited fluctuation, with most major plants operating normally. Regarding new capacity, Henan Sailongtu's 50kt/a ethanol unit is undergoing trial runs, while the 200kt/a unit at Jingmen Yuanhan and the 500kt/a unit at Kaiyue Coal Chemical are scheduled for trial runs. However, significant supply additions from these projects within the month are limited. On the demand side, chemical plants’ purchases are mainly for routine needs. The operating rate of downstream ethyl acetate units increased to 68% in the first week of December, up 9.8 percentage points from the previous week, and is expected to remain at a relatively high level in December.
Overall, while the coal-based ethanol market lacks robust underlying support from its own supply-demand fundamentals, rising production costs for corn-based ethanol in Northeast China at the start of the month are exerting upward cost pressure, thereby reinforcing expectations that fermented ethanol prices will hold firm. The relatively strong ethanol prices in Northeast China are helping to sustain firm price expectations across several regional markets. Coupled with increased consumption demand from certain downstream chemical sectors in December, coal-based ethanol prices are likely to remain stable with a potential for slight upward movement.
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