US Ethanol Prices Continue the Bearish Rally into December 2023

Houston (Texas): Ethanol trading prices remained unchanged last week but were seen to be weaker in the early weeks. FOB Houston Ethanol and FOB Santos, Brazil anhydrous Ethanol prices were seen lower last week and down in the early week. Although an increase in freight rates in some regions led to an increase in prices for delivery, the factory shipment situation and prices for domestic ethyl alcohol are still operating weak. This is mainly due to the fall in the price of Ethanol.

Freight from the US Gulf to Saudi Arabia saw the largest decline due to less demand in the market, and it fell by 1% from last week. At the same time, liquid tanker freight rates saw a 4% up from the average freight rate last week. Overall freight rates were 11% lower than in a similar week in 2022.

Prices of Ethanol on a cost and freight basis from the US Gulf to Central America were down by 0.8% last week and 4.3% this week as compared to a similar week in 2022 as the values of Ethanol went down. Prices of Ethanol on a cost and freight basis from the US Gulf to Europe went down last week by 1% and by 24.4 % in a similar week last year. The main reason for the decline in the percentage rate is that demand is less in winter; transportation also becomes a major problem due to this. Meanwhile, Brazilian Ethanol showed a 1% increase in cost and freight prices from Brazil to Southeast Asia and from Brazil to Europe. Cost and freight prices showed a decline of 7.7% last week and 12.1% in a similar week last year.

The demand for the feed continued to be sluggish while imports of the raw material corn and its substitutes kept arriving at the ports. The corn supply in the market is somewhat loose, thus making the overall prices of the corn to be weaker. The cost side of Ethanol gave rise to bearish factors for the market.

Significant difference in operating production rates was observed in different regions. Thus, providing bearish factors for the market on the supply side was bearish. The overall cost was bearish, with significant differences in supply and demand across all the regions. In short, it can be said that there are chances that the Ethanol market is going to experience weak consolidation. In the backdrop of the festive season and off-season lull in the transportation industry, demand fundamentals are expected to remain underwhelming, keeping the prices in check in the forthcoming weeks. However, market participants can expect recovery in the first half of Q1 2024 as consumption rates are likely to pick up pace and put demand pressure on the prices.