A 3,000 mt parcel of Vietnamese ethanol has been heard sold to China for September delivery, outpacing the 2,792 cu m it received over January-July, market sources said Thursday.
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The arbitrage window to China closed in January, when Beijing slapped a 30% import duty on denatured ethanol. Over January-July, China's ethanol imports amounted to only 2,792 cu m, latest customs data showed.
If the Vietnamese cargo is confirmed as arriving in September, it will double China's total ethanol imports for the year to date.
China's domestic ethanol prices have been firming since July after a subsidy for domestic ethanol plants expired and plants started shutting for seasonal maintenance.
Environmental protection checks also resulted in the shutdown of some plants, further tightening supply in the local market.
China's domestic anhydrous ethanol price was heard at Yuan 5,800/mt ($879/mt) Thursday, up Yuan 100/mt week on week and up Yuan 700-800/mt from two months ago, sources in China said. Beverage grade ethanol was heard around Yuan 5,000/mt.
The rise in domestic prices has made duty-free ethanol imports into China profitable again. The Vietnamese anhydrous ethanol cargo was heard traded at around $650/mt CFR China in early August for delivery in September. There is no import duty on Vietnamese ethanol in China.
Despite the arbitrage reopening, sources do not expect imports to surge.
"Domestic prices should cool down in mid-October as many ethanol plants will resume normal production," said a trade source in China. "If anyone is planning to buy cargoes before that, there is not much time left to make the deal," the source added.
Meanwhile, there was market talk that China might reintroduce its subsidy for ethanol plants from November to support corn consumption, as it did in November last year. This could again lower domestic ethanol prices by cutting production costs.
--Xiaojuan Gao, firstname.lastname@example.org
--Edited by Wendy Wells, email@example.com