Asian industrial and beverage grade ethanol import prices may rise in 2022 as key exporter Brazil sees higher domestic prices and strong sugar valuations.
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Brazilian hydrous ethanol values, FOB Santos, closed at $612/cu m on Dec. 23, higher than $416/cu m on Jan. 4, S&P Global Platts data showed. Ethanol prices have been climbing toward the end of 2021 as crude oil rallied.
Buyers in Ulsan, South Korea, were largely covered for March loading of Brazilian cargoes, which will arrive in May. However, this will leave Ulsan buyers uncovered for June and July, before fresh Brazilian cargoes could reach South Korea.
Market participants expect prices to range from $660-$700/cu m, CFR Ulsan, for July-August 2022 arrival of Brazilian cargoes, $30-$50/cu m higher than for 2021 cargoes.
In Pakistan, producers of extra neutral alcohol, or ENA, grade ethanol -- used for making disinfectants and beverages -- were largely sold out for the second quarter of 2022 amid strong demand from Europe. However, third-quarter cargoes were unsold as buyers in Europe were unwilling to purchase so far ahead.
As a result, prices in Pakistan could come under pressure for Q3 2022, with the bulk of major traders having secured amply supply for Q1 and Q2 2022.
Fuel ethanol in Philippines
The Philippines saw higher imported fuel ethanol prices toward the end of 2021 as COVID-19 restrictions were lifted. Gasoline and ethanol demand rebounded in Metropolitan Manila region leading to a spur in buying for Q1 2022.
The local monthly allocations, or LMAs, for fuel ethanol -- used for blending with gasoline -- in the Philippines had been on an uptrend in 2018 and 2019, but fell in 2020 due to the coronavirus pandemic.
The uptrend for LMAs is expected to return in 2022, with Q1 2022 LMA set at 103,586 cu m -- higher than 84,200 cu m in 2021 and 95,400 cu m in 2020.
Philippines gasoline blenders have to fulfill their domestic ethanol monthly allocations before importing ethanol due to the government's policy. However, the gasoline blenders usually pay more for domestic ethanol compared with imported ethanol.
The average domestic price for ethanol was Philippine Peso 58.36/liter, equivalent to $1,170/cu m, over January-November 2021. Imported ethanol price was $660.54/cu m CIF Philippines for the same period, according to Platts calculations.
As a result, it was still unclear whether the economic recovery in the Philippines will result in higher fuel ethanol imports in 2022.
Uncertainty in China
China halted its E10 mandate in 2020 but the country continued to buy US ethanol.
In October and November 2020, numerous US ethanol cargoes were booked for loading period until July 2021 by state-owned companies as the price arbitrage opened between the two countries despite import levies of up to 70% for US denatured ethanol.
After a flurry of deals in late 2020, China stayed largely on the sidelines in 2021 as US ethanol prices soared and the arbitrage between the two countries closed.
However, arbitrage opportunities might open again in 2022 if ties between the two countries thaw, and tariffs are lifted against US ethanol.
Chinese fuel ethanol prices were pegged at Yuan 6,500/mt ex-factory in North China in the week to Dec. 24.