Ethanol prices may elevate owing to its high demand as fuel

Ethanol prices have shown buoyancy and were observed at $870/Mt, FOB California, USA, on 8^th April following the increasing feed, corn, and sugarcane prices. Apart from its applications in food, pharmaceuticals, personal, and healthcare, Ethanol has also shown its use as biofuel. These factors have positively impacted the demand for Ethanol in the global market.

Ethanol is manufactured by fermentation of molasses obtained from corn and sugarcane. The prices of corn and sugarcane burned up, showcasing its proportional effects on the prices of Ethanol. Ethanol manufacturers faced turmoil in India because of the oil marketing company (OMCs) policy. According to the manufacturers, production of Ethanol has been hampered due to a lack of financial support from the government. Furthermore, the manufacturers believe that the policy does not support major Ethanol producing states which have pressured them to increase the production cost, showing its direct effects on the prices of Ethanol. Furthermore, to achieve the target of E20 by 2025, India is focusing more on increasing the production rate. As per the plan of the central government of India, by 2025, Indian vehicles should run on fuel consisting of 80% petrol and 20% Ethanol to cut down the carbon emission through vehicles and decrease the dependence on petrol.

On the other hand, the prices of Ethanol in the USA may witness a slight decline due to sufficient availability of feed (corn) in the domestic market. Consequently, the manufacturers have an adequate feed to continue their production rate, which may slightly diminish Ethanol prices. Furthermore, the US government is considering adding more Ethanol to gasoline, forcing the ethanol manufacturers to boost their operational and production rates to cater to the domestic demand. Adding to the European region market, the government of Brazil has made changes in the tariff policy for Ethanol imports. According to the Ministry of Economy, in the year 2022, Brazil will suspend its 18% tariff on imports of Ethanol. These factors will lead to the escalation of Ethanol prices in Brazil and may show sporadic behavior in the prices of Ethanol in the North American market.

As per ChemAnayst, the prices of Ethanol may observe a slight increment in upcoming weeks in the global market. Downstream sectors such as pharmaceutical and food have shown constant demand for Ethanol as raw material, and various steps to cut the carbon emission have flourished the demand for Ethanol.