H1, 2024 Anhydrous Ethanol Price Fell
Introduction: China’s anhydrous ethanol supply ramped up in H1, 2024, and the downstream profits worsened, lifting the downward pressure on anhydrous ethanol prices. The capacity of coal-based anhydrous ethanol continued to expand, and it was difficult to make profits from fermented anhydrous ethanol production, so ethanol enterprises faced difficulties in development. In H2, 2024, several coal-based ethanol units are planned to be put into production, and the competition in the anhydrous ethanol industry will be unabated.
The main regions of anhydrous ethanol in China witnessed a price downtrend in most of H1, 2024, with only a significant rise in May. From a relative level, on June 28, 2024, the average closing price of anhydrous ethanol in northern Jiangsu (in cash, self-delivery, tax included, the same below) was RMB 6,750/mt, down RMB 700/mt or 9.39% from the last trading day of 2023. As of June 28, 2024, the average price of anhydrous ethanol in H1, 2024 was RMB 6,869.31/mt, down 7.81% from the average price of RMB 7,451.22/mt in H1, 2023 and down 8.69% from the average price in H2, 2023.
The highest price of anhydrous ethanol was RMB 7,450/mt in northern Jiangsu in H1, 2024, occurring in January, and the lowest price occurred in May at RMB 6,550/mt. The main factors affecting price fluctuations in H1, 2024 were supply and demand. From the supply perspective, the output of anhydrous ethanol rose by nearly 170kt compared with the same period last year, with the main growth coming from the output of coal-based anhydrous ethanol. In terms of demand, although the demand from the ethyl methyl carbonate field improved, that from most downstream fields underperformed due to poor profits, exacerbating the difficulty in sales of anhydrous ethanol. Therefore, the competition in the anhydrous ethanol industry intensified. At the end of Q1 and the beginning of Q2, sellers’ sales intention was high, causing prices to fall to a low point.
The output of anhydrous ethanol increased to 850kt in H1, 2024, up nearly 25% Y-O-Y. Hereinto, the output of coal-based anhydrous ethanol and bio-based anhydrous ethanol was 297.7kt and 552.3kt, an increase of 95% and 5% respectively over the same period last year. From the monthly output, the lowest output in the first 6 months was in February, because the ethanol units in southern China were routinely shut down around the Spring Festival holiday. The highest output was in April. From May to June, the anhydrous ethanol output saw a contraction, mainly affected by low profits and high inventory. In addition, some ethanol units in northern China took maintenance in May, and coal-based anhydrous ethanol units were also in the maintenance period from May to June. Therefore, the highest output appeared in April.
The production profit of anhydrous ethanol was in a loss-making state in H1, 2024. Taking northern Jiangsu as an example, the price spread between anhydrous ethanol and 95% ethanol fluctuated between RMB 575-800/mt, which was lower than the level in previous years. Affected by the narrowing price spread, the profit from producing anhydrous ethanol by the dehydration of fermented ethanol remained negative. This also showed that competition in the anhydrous ethanol industry intensified. However, ethanol enterprises also did not gain profits from producing 95% ethanol themselves by buying feedstock, and it was more profitable to produce anhydrous ethanol by the dehydration of outsourced 95% ethanol.
The competition in the anhydrous ethanol industry may increase from H2, 2024 to 2025. The anhydrous ethanol capacity will continue to expand in the future. It is estimated that by 2025, China’s anhydrous ethanol capacity may rally by more than 1,000kt/a. Among them, the new capacity will mainly appear in the field of coal-based anhydrous ethanol. By the end of 2025, the capacity of coal-based anhydrous ethanol is expected to reach 3,204kt/a. Therefore, the competition between coal-based anhydrous ethanol and fermented anhydrous ethanol will intensify. Although the current quality of coal-based anhydrous ethanol is not the same as that of anhydrous ethanol produced by 95% fermented ethanol, there is still room for quality improvement with technological advances in the future. In addition, the demand from the end industry is lower than expected, and the downstream profits have been significantly squeezed. Therefore, it will be an important consideration for downstream cost control to find lower-cost ethanol in the future. The improvement of cost competitiveness will help downstream enterprises gain greater advantages in the survival of the fittest in their own industries.
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