August Ethanol Market Trend Fluctuates Downward in China

August 29 update

According to the commodity market analysis system, overall supply has increased; raw material prices have fallen, and cost support is insufficient. The supply-demand contradiction is prominent, with a decrease in demand for liquor and rigid demand procurement in the chemical industry. From August 1st to 29th, the average price of ethanol producers in China fell slightly from 5677 CNY/ton to 5580 CNY/ton, a decrease of 1.71% within the period, and a year-on-year decrease of 6.34%.

At the beginning of the month, the Chinese ethanol market prices fluctuated narrowly, with cost-side favorable factors gradually weakening. There were slight regional differences in supply, with some areas seeing an increase and others a decrease in supply volume.

In the first ten days of the month, the ethanol market prices in China were weak, with limited overall market transactions and factory quotations declining.

Mid-month, the Chinese ethanol market prices were weak, with factories showing a positive attitude towards shipping and lowering their quotations.

In the late month, the domestic ethanol market prices in China were weakly adjusted, factory quotations decreased, new orders were limited, and factories were actively shipping goods.

Cost Perspective: Costs are declining, though the initial purchase price of corn in Northeast China may rise compared to previous years. However, there’s a possibility of higher opening prices followed by a downward trend. Meanwhile, corn supplies in Henan province are expected to increase significantly, potentially influencing corn price movements in that region. Additionally, ethanol production costs remain on the bearish side, adding further pressure.

Supply side: In August, the Heilongjiang Hongzhan Laha anhydrous plant resumed production after a short stop, and the Bayan plant is expected to resume production around the end of the month. The Wanli plant resumed production on August 5th, but it has not yet reached full fuel production. The Heilongjiang Shenglong plant resumed production on August 21st, and the Jilin Fukang third and fourth lines resumed production on August 13th, while the Yushu plant stopped production on August 5th. The Inner Mongolia Jietai Nuode plant started regular production around August 25th, but no anhydrous product has been shipped. The Shandong Qufeng plant was ignited on August 29th. Huaxing has returned to normal production after a short stop in the second half of the month, and Mengzhou Houyuan is operating at around 70% capacity. The impact on ethanol supply is mixed.

On the demand side, downstream demand initially declined before rebounding. Ethyl acetate producer Henan Shunda may resume operations in September, while the ethylamine plant in Shandong is scheduled for maintenance—and there are also planned shutdowns in Zhejiang. Meanwhile, the methyl ethyl carbonate plant in Shandong, which had halted production, could restart around mid-September. Meanwhile, demand for liquor is expected to pick up ahead of the upcoming dual holidays. Pre-holiday chemical stockpiling will likely drive a surge in demand by mid-September. In the short term, several positive factors are supporting ethanol demand.

Market Forecast: With supply expected to rise while demand remains modest, China's ethanol prices are likely to weaken in the short term. However, as pre-holiday stockpiling begins, prices may stabilize. Ethanol analysts anticipate that the market will initially face downward pressure before gradually stabilizing over the near term.