Fuel Ethanol Price to Fall in Q4, 2023
Introduction: China’s fuel ethanol prices went up in Q3, 2023. As of September 27, the average price of the fuel ethanol in Northeast China was RMB 6,975.4/mt in Q3, 2023, up 1.07% Q-O-Q but down 1.04% Y-O-Y. Both the supply and demand of fuel ethanol increased in Q3, but the increase in demand was greater than that in supply, so the inventories of fuel ethanol producers declined. In Q4, 2023, the fuel ethanol price is expected to fall back because the positive effect of demand on the price may decrease.
Demand steadily increased in Q3, and fuel ethanol prices hit a new high.
China’s fuel ethanol prices rose in Q3, 2023. The average price of fuel ethanol in Northeast China Q3, 2023 was RMB 6,975.4/mt, up 1.07% Y-O-Y. The average price on September 28 was RMB 7,125/mt, up 4.01% from June 30.
In Q3, 2023, fuel ethanol prices in Northeast China hit a new high, and the main influencing factor was the relationship between supply and demand. On the supply side, the output of fuel ethanol in Q3 grew Q-O-Q, but the units at Heilongjiang Wanli Runda Biotechnology and SDIC were shut down for maintenance. Therefore, the inventory of most fuel ethanol producers dropped to a low level, affected by the rising downstream consumption. On the demand side, the demand for ethanol gasoline increased in Q3. The consumption of refined oil moved up with the high temperature and summer vacation. Besides, the international crude oil price went up. However, the increment in fuel ethanol prices was smaller than that in oil products. Therefore, the demand for fuel ethanol ramped up.
Fuel ethanol prices are likely to fall back as the positive influence of demand on the price weakens.
The main factors affecting fuel ethanol prices in Q4 will be supply and demand. It is expected that the demand may shrink, dragging down the fuel ethanol prices. However, the supply side will probably give certain support to the fuel ethanol price in recent months.
First, players still need to pay attention to gasoline consumption and the economics of adding ethanol. Although the economics of ethanol addition are expected to remain in Q4, the decline in gasoline consumption will affect the demand. Regarding the economics of adding ethanol, the international crude oil price is expected to stay at a robust level, which will support the price of gasoline and related products. Thus, the ethanol addition is likely to be of advantage. In terms of refined oil consumption, air-conditioning fuel consumption has declined with the weather getting cool. Therefore, the gasoline demand will likely stabilize after decreasing after the Mid-Autumn Festival and National Day holidays.
Second, the output of fuel ethanol is predicted to increase in Q4 because the maintenance of corn-based ethanol producers will decrease, but the supply pressure in October is still not expected to be significant. After the maintenance of the phase II unit Heilongjiang Hongzhan Biotechnology is completed in October, Heilongjiang Hongzhan Bioenergy may take maintenance. Moreover, players also need to pay attention to that both coal-to-ethanol plants plan to conduct 20-day maintenance in October. Overall, the supply side will still give certain support to the fuel ethanol market. In addition, attention needs to be paid to the demand for edible and industrial ethanol in Q4. With seasonal demand growth in the downstream liquor and chemical fields, ethanol producers may adjust the output ratio of fuel ethanol to edible and industrial ethanol.
To sum up, support to the fuel ethanol price from the demand side is expected to decrease in Q4, but the supply pressure may be light due to the low inventory at the end of September. Therefore, the fuel ethanol price is reckoned to drop in October, but the range will be limited. In November, players need to pay attention to the different price trends caused by the weather in Northeast China and the changes in transportation from Northeast China to East China and North China. The possibility of price decrease in production areas is larger than that in consumption areas.
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