COMMODITIES 2025: Asian fuel ethanol to see healthy demand on biofuel push

This is part of the COMMODITIES 2025 series where our reporters bring to you key themes that will drive commodities markets in 2025.

The Asian fuel ethanol market is expected to be steady in 2025 amid an uptick in demand due to the policy push for biofuels in the region, market sources said, with feedstock availability, competitive pricing and global uncertainties also seen as key factors.

Asian fuel ethanol prices were under pressure in 2024, mirroring the drop in US ethanol prices throughout the year, barring a short-lived uptick during the summer driving season.

However, market sources are bullish about fuel ethanol demand in 2025 as more Asian governments push for ethanol blending.

For instance, they expect US fuel ethanol to continue to find its way into the Philippine market in 2025, as the Asian country announced voluntary 20% blending in 2024.

Additionally, amid forecasts of rising demand and strengthening corn prices, US ethanol prices are expected to strengthen in 2025, which could lend support to Asian prices, S&P Global Commodity Insights analysts said.

India's ethanol demand to grow

India's ethanol demand has witnessed significant growth over the years amid the country's ethanol blending program, and market sources expect the growing number of automobiles and the government's focus on ethanol blending to further boost ethanol demand in 2025.

As India advanced its 20% ethanol blending target to 2025 from 2030, A Niti Ayog report outlined the country's total ethanol requirement in 2025 at around 13.50 billion liters, with fuel blending demand at 10.16 billion liters.

The same report estimates India's overall production capacity requirement at 17 billion liters to meet this target by 2025, considering an average operating rate of 80%.

The current annual production capacity is at 16.85 billion liters, according to data from the Department of Food & Public Distribution, and market participants believe 2025 will see further growth in ethanol output as producers diversify their feedstock options.

As the Indian government pushes ahead with its ethanol blending target, other industries see imports as an option to meet their demand.

India imported roughly 495 million liters of denatured ethanol this year as of September, up around 82% from 2023, data from the commerce department showed, while according to the US Energy Information Administration, Indian imports of US ethanol are seeing the sharpest growth in 2024 among all destinations.

Weak demand for industrial-grade ethanol

Meanwhile, in the Asian industrial-grade ethanol market, prices in 2024 witnessed a sharp drop from the previous year, Platts data from Commodity insights showed.

Some sources attributed the drop to Brazilian ethanol prices, which remained soft due to the healthy sugarcane crop in 2023.

However, sources expect some support for prices in 2025 as the Brazilian crop this year was not as healthy as in 2023.

"When ethanol derived from the new Brazilian crop hits the market, we believe prices may get some support in 2025," a source said, but added that "demand is expected to continue to be on a softer footing, which may balance any significant upward price movement."

In South Korea, imports of industrial undenatured ethanol are likely to end up lower this year than in 2023, according to trends seen in the country's trade data.

South Korea imported 178,824 mt of undenatured ethanol in 2023, with a monthly average of roughly 14,902 mt, while as of November 2024, it has imported 125,735 mt this year, with a monthly average of around 11,430 mt, down 23.3% on a monthly average basis.

"Many Korean and Japanese buyers have covered [their] inventory until the end of Q2 2025," another source said, adding that "demand is expected to remain weak as buyers are less likely to be under pressure to make fresh purchases until they find lower prices."