Ethanol: The Bottom is Solid, and Shipments are Improving Before the Mid-Autumn Festival

Last week, the domestic ethanol market represented by East China was active, and the price of ethanol in most regions was close to the bottom. Previously, the inventory of downstream raw materials continued to be low. Before the arrival of the Double Festival, buyers successively entered the market to purchase ethanol. The downstream purchase price of major chemicals in East China was higher than the previous batch. Up 30-50 CNY/ton. As of last Friday, the ex-factory price of 95% ethanol in northern Jiangsu reached 6570-6600 CNY/ton including tax. At the end of last week, some factories temporarily raised it by 50 CNY/ton, and the high-end offer was 6650 CNY/ton including tax.


Production losses continue, ethanol prices hit bottom

The price of ethanol has continued to decline since mid-May until last week. The current round of prices fell by 875 CNY/ton, or 11.75%. Since May, cassava ethanol in East China has experienced production losses, and some factories once lost close to 300 CNY/ton. Production losses have also led to lower ethanol production. In August 2022, China's edible and industrial ethanol production was 439,600 tons, the lowest output since September 2021. Among them, cassava ethanol production fell the most significantly. The lowest monthly production since February 2019. After the decline in production, the pressure on ethanol plants decreased, and the willingness to continue to cut prices was significantly weakened.


Buying rebounded downstream replenishment enthusiasm increased

After the industry's ethanol price bottomed out and reached a consensus, the willingness of downstream buyers to replenish goods increased. On the one hand, although the terminal demand is improving slowly, the inventory of some downstream raw materials continues to be at a low level. Before the arrival of the double festival, there is just a need for replenishment. On the other hand, automobile logistics is facing new changes. Long-distance freight rates have risen significantly in August, and a small number of areas are facing increased uncertainty in logistics in the future, and there are buying intentions to stock up in advance. Judging from the situation of steam freight only, from the northeast to Shandong, the lowest period of the year was 150-200 CNY/ton, and it has risen to 300-400 CNY/ton. The rising freight rates of Northeast China further increase the competitiveness of local ethanol prices in East China.


Increased ethanol trading volume further boosts market confidence

Last week, the main chemical downstream transaction volume increased. The large order transaction in East China exceeded 15,000 tons. The lowest transaction in the early stage was close to 6,450 CNY/ton (ex-factory in North Jiangsu), and it was negotiated to 6,500-6,550 CNY/ton (ex-factory in North Jiangsu) last weekend. In terms of the weekly situation in August, the lowest one-week downstream transaction was only close to the 2,000-ton level. The concentrated replenishment of downstream products last week also strengthened the mentality of the ethanol market, the enthusiasm for trade buying increased, the small order transactions in the ethanol market accelerated, and the production and sales of ethanol plants were well balanced.


Short-term price in the end recovery probability exists

It is expected that at least two other chemical downstream companies will just need replenishment this week. There are still four working days before the Mid-Autumn Festival. Considering that the current North Jiangsu general-level spot is not abundant, it is expected that the probability of low-end prices in East China will still rise slightly. Conventionally, there is still a demand for replenishment in the downstream before the National Day. Therefore, after the Mid-Autumn Festival, the market demand will be released, but the terminal demand and the situation of automobile logistics still need to be paid more attention.