Brazilian Grade B cargoes pricier in 2021

New York — Far East buyers, including South Korea and Japan, are anticipating higher Grade B prices from Brazil versus 2020 and are waiting for the start of the harvest before showing bids.

Brazil Grade B ethanol prices have dramatically climbed over the past year to March 22 because of increased domestic demand for hydrous ethanol and fears over a hydrous ethanol supply shortage in early April.

S&P Global Platts assessed Grade B, FOB Santos for 20-30 days forward loading at $536/cu m on March 19, up 90.7% from a decade-low price set on April 27, 2020.

The FOB Santos Grade B premium to FOB hydrous ethanol remained at $30/cu m.

Market participants were hopeful Grade B ethanol from Brazil will land into Ulsan at $550/ cu m to $600/cu m CFR Ulsan in the coming months.

Select buyers were strategically delaying negotiations with Brazilian producers in anticipation of lower prices in the near term due to increased ethanol availability from mills coming online at the start of the Brazilian harvest in early April.

"Buyers are keen for prices to ease before negotiating in earnest and a return to the tables in April is very much on the cards," said a Japan-based trader. "While Brazilian ethanol had traded lower towards the end of the week, hopes are set on lower prices across the Brazilian ethanol complex in the coming weeks."

Pakistan not competitive

Pakistani REN grade ethanol had earlier been sold to China in December and January and ENA grade ethanol was mostly shipped to Europe.

According to Chinese custom data, Pakistan supplied 10,422 cu m of undenatured ethanol into China in February.

At current prices, ENA or REN grade ethanol will land into Ulsan at close to $800/cu m CFR Ulsan which still gives Brazilian Grade B around a $200/cu m price advantage.

Japanese long-term purchases to cool

Although Japanese buyers purchased six-eight months in advance to ensure Grade B supplies in 2020, market participants believe Asian countries will not be as extreme this year in their long-term purchasing agreements of Grade B, with purchase agreements stipulating around two-four months of supply coverage.