Nov Fuel Ethanol Price Rose After Bottoming Out
Introduction: In November, China’s fuel ethanol prices rebounded from the bottom. Fuel ethanol transactions increased at the bottom of the price. In the middle of the month, Northeast China’s producers enhanced their prices continuously, but the transactions decreased after the price rise. Therefore, the price fell back in the last week. In December, the market demand is expected to be flat, lacking holiday boosts, and snowfall may affect the drive of northern China’s residents, which will affect the consumption of refined oil. The uncertain factors impacting the market are mainly on the supply side. In the absence of an increase in output by Northeast China’s producers, fuel ethanol prices may see slowed-down fluctuations in December.
In November, fuel ethanol prices bottomed out and rebounded, and the price once dropped to the lowest since May 2020.
Fuel ethanol prices in many places rose in November. Among them, the price in Northeast China rebounded from the bottom and then went down again. As of November 29, the closing price of fuel ethanol was RMB 5,150-5,350/mt, up RMB 300/mt from October 31. In H1 November, fuel ethanol producers in Northeast China were active in sales, and the price dropped to the lowest level since May 2020 as of November 7. Then, the transaction improved at the low prices, and the orders from state-owned refineries grew. However, the delivery period of some orders was long, and the profit from producing fuel ethanol was lower than that from industrial and edible ethanol, so the major producers in Northeast China reduced their output ratio of fuel ethanol to below 30%. As the fuel ethanol price in Northeast China rapidly reached the bottom, the inventory declined notably. Besides, the producers were under heavy cost pressure. Therefore, major producers enhanced their offers by RMB 250/mt and RMB 500/mt on November 14 and November 17 respectively. However, the transaction became unsmooth after the price rise. Therefore, the offers fell back by RMB 300/mt in the last week.
The fuel ethanol prices in Shandong did not rise as much as those in Northeast China. At the end of November, the transaction price of fuel ethanol in central Shandong was RMB 5,330-5,450/mt including tax, up RMB 195/mt from the closing price in October. The lack of holidays, coupled with the weak fluctuations in crude oil prices, the demand for refined oil was flat, but the intention to replenish ethanol at a low price increased. Besides, the price of coal-based ethanol also climbed because the consumption of some low-level inventories performed well. Therefore, fuel ethanol purchase prices in Shandong followed the uptrend in Northeast China. However, traders with some previous inventories were motivated to sell goods, so the increment in fuel ethanol prices in Shandong was smaller than that in Northeast China.
Despite certain support from the cost side, the fuel ethanol output is expected to be ample, so the supply side may still be affected by transportation at some stage.
In terms of cost, it is expected that the decrement in corn prices in Northeast China may narrow in December. Considering the excessive toxins and mildew in the new corn, it is expected that there will be a possibility of a price increase to promote the purchase of high-quality corn. Therefore, the price of high-quality grain may rise slightly. In addition, the supply of corn may be loose due to farmers’ high interest in sales, but farmers will be more reluctant to sell at low prices after the temperature declines, which will underpin the corn price.
In terms of supply, the fuel ethanol output in December is likely to rebound. On the supply side, the output of fuel ethanol in December is stable and may rebound. The producers in production do not plan to adjust their output temporarily and are still concerned about the weak expectations for edible ethanol prices. After the fuel ethanol price rises, the profit will improve. The focus can be on the subsequent production plans of producers with relatively low fuel ethanol output. In addition, as for other sources of goods, players can pay attention to the commissioning of the new capacity in Shandong, which is currently scheduled to be put into production in mid-December. in terms of demand, gasoline demand is in the slack season, and the demand for refined oil may still be weak because the residents’ travel will slow down due to the lack of holidays and increased snowfall in northern China. The consumption of the feedstock inventory at refineries may hardly improve, but local independent refineries will mostly maintain stable replenishment to ensure production due to the concerns that the logistics in Northeast China in winter may affect the arrival speed. The signing of orders of state-owned refineries performed well, and part of the procurement cycle is until the end of the year or January 2025.
In summary, it is expected that the price fluctuations of fuel ethanol will slow down in December. In November, the prices in Northeast China and Shandong rose first and then fell to test the downstream buying indications, and transactions at higher prices were unsmooth. After the price increase in Northeast China in late November, the production profit of fuel ethanol was better than that of edible ethanol. It is expected that major producers may raise their output ratio of fuel ethanol in December. If there is no obvious increase in output when the orders from state-owned refineries in Northeast China are sufficient, the possibility of price stabilizing or trending sideways will increase. At the end of 2024, the supply of goods arriving in Shandong is more diverse than before, and the market price may be less affected by the snowfall in Northeast China than before. However, if the arrival of Northeast China’s ethanol is not fast and freight rises, the prices of other regions’ ethanol may flatten out or clime periodically.
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