China’s ethanol imports spike in July

Source: By Lauren Moffitt, Argus Media • Posted: Sunday, August 29, 2021

China imported 52,000t (66mn litres) of undenatured ethanol in July, defying poor arbitrage economics to push the year-to-date total to a fresh high.

Monthly receipts rebounded after dipping to 30,500t in June, sending the January-July total past 331,000t, by far the highest level for the first seven months of the year. The US accounted for 37,500t and Pakistan the remaining 14,500t in July, despite firm pricing in both source locations.

The arbitrage for US fuel ethanol cargoes has been shut for most of this year, as prices at Chicago’s Kinder Morgan Argo terminal reached and remained near seven-year highs. The bid-ask spread for Argus ethanol cfr China fuel-grade has stayed between $95/t and $190/t since launching on 4 June.

The July imports from the US may have been the late arrival of a spate of bookings made at the end of last year, possibly delayed by port congestion as China attempts to halt the spread of the Delta variant, market participants said. Alternatively, part of the shipment may have been lower-grade material intended for industrial applications that was booked at a discount.

Pakistan-China shipments of 96pc extra neutral alcohol (ENA) became workable at the end of June, when a key China-based trader and at least two Chinese chemical companies booked bulk cargoes in a $850-880/t fob Karachi range, arriving at Chinese ports at $910-940/t cif. At the time, Chinese 95pc cost 6,900 yuan/t ($1,064/t) including 13pc value added tax, but has since dropped by around Yn200/t.

Discussions are currently on hold given harvests for ethanol feedstocks are due in both countries in the coming months — summer corn from mid-September in China and sugarcane from October in Pakistan. Crop output is forecast to be 6pc and 12pc higher than last year respectively for each, which may weigh on pricing and arbitrage opportunities.