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S Korea, Japan ready to switch to Brazilian ethanol from new crops: sources

Singapore — South Korean and Japanese trading houses were making a seasonal switch towards cheaper Brazilian Grade B ethanol, with the Brazilian crushing season expected to begin mid April and products being made available from the new sugarcane crop, market participants said this week.

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"South Korean and Japanese buyers are only waiting for a clear signal of when the Brazil sugarcane harvest will officially start and the Pakistan sugar mills will be closed before they start buying in large quantities from Brazil," said one trader.

On the Korean front, buyers were booking Brazilian ethanol for July arrival. While South Korean buyers traditionally offtake ethanol one month before arrival, recent months saw a shift in buying pattern with purchasers eager to secure supplies faster due to soaring Pakistani ethanol prices, sources said.

Pakistani ENA was heard at $700-$720/mt FOB Karachi for June loading, higher than the $650/mt reported in March. Acute shortage of molasses led to the higher prices and heightened the possibility of less production in the latter half of the year.

South Korean ethanol imports surged in March, following two consecutive months of decline, latest data released by the Korea Customs Service showed. This came on the back of a jump in denatured ethanol imports from the US.

Imports of denatured ethanol -- used mainly on the industrial side -- jumped 148.23% month on month and 51.6% year on year in March to 32,927 mt.

Meanwhile, imports of undenatured ethanol fell by 26.4% year on year, but was 3.19% higher month on month. On the whole, imports of ethanol surged 80.23% month on month to 45,008 mt in March, higher by 18% year on year.

Moving to Japan, at the beginning of April, trading houses were preparing to negotiate with Brazilian suppliers for August delivery with hopes of wrapping up talks before the start of the Golden Week holidays at the end of the month. However, news emerged of a reluctance from both sides to fix prices following the recent rainstorms in Brazil.

Price indications of Brazilian Grade B ethanol were reported at around $530-$540/cu m CFR Ulsan for July arrival.

-- Donavan Lim, d.lim@spglobal.com

-- Phillip Herring, phillip.herring@spglobal.com

-- Edited by Shashwat Pradhan, newsdesk@spglobal.com