The 55.65% spike in the Philippines' third quarter local monthly allocations for ethanol to 114,633 cu m will reduce imports, as domestic oil companies would be required to absorb the higher volume before seeking lower priced imports, market sources said Thursday.
Receive daily email alerts, subscriber notes & personalize your experience.Register Now
The Philippines Department of Energy set the LMAs for Q3, 40,983 cu m or 55.65% higher than 73,650 cu m in Q2, and 35,833 cu m or 45.47% higher than Q3 2017.
The ethanol LMAs are determined every quarter and oil companies in the Philippines, which need to fulfill the country's E10 mandate, are allocated a purchase quota proportionate to their market share in the retail gasoline market. The oil companies are required to fulfill their domestic ethanol allocations before they import the cheaper fuel-grade ethanol.
After the LMAs were released, there were doubts in the market as to whether domestic ethanol producers could supply all the volume allocated for Q3.
"I have covered June, [would] buy locally in July and look at importing for August or early September arrival," a buyer for a Philippine oil company said.
"I don't know what to do yet, I'll wait and see what the others are doing, and this would definitely eat into our margins," another buyer for a Philippine oil company said.
The domestic bioethanol reference price for April was Pesos 53.54/liter ($1,070.80/cu m), according to the Philippines Sugar Regulatory Administration.
The average imported fuel ethanol price for April was $486.75/cu m CIF Philippines, S&P Global Platts data showed. This would equate to $550.61/cu m CIF Philippines after accounting for 1% import duty and 12% value added tax -- almost half the price of locally produced ethanol.
The prevailing common retail pump price at Metro Manila for 97 RON gasoline is Pesos 56.32/liter, 95 RON gasoline is Pesos 55.77/l and 91 RON gasoline is 53.57/l, according to data released by the DOE on May 4.