For the Quarter Ending September 2023
At the start of the third quarter, Ethanol prices maintained stability but dropped in August. A surge in Ethanol output, due to a higher price gap between end-use oil prices and raw material corn prices, forced Ethanol prices to become cheaper again, like the previous month. Moreover, the industry remains a little skeptical about increasing demand for downstream renewable green industries such as biofuel, vegetable oil, biodiesel, etc. The recent move by The Biden administration towards minimizing blending protocols, coupled with surging gasoline demand, will pose challenges to the industry. This downward change in prices has been further attributed to ample domestic inventory levels and superior production volume coupled with high export scenarios. In September, a fall in Ethanol yield and continuous stock consumption led to a 4.7 percent price jump. According to data released by the Energy Information Administration (EIA) on Aug. 30, US Ethanol production fell by nearly 4 percent, and fuel stocks were down by more than 5 percent for the week ending Aug. 25. A sharp growth in demand has been observed in the high-purity alcohol industry. Greenfield Global Inc., a world-renowned manufacturer and distributor of specialty alcohols and solvents, increased its production capacity in its Johnstown distillery from 30 million gallons per year to 70 million gallons per year. POET, the world’s largest producer of biofuels, reopened its Cloverdale bioprocessing facility, signaling lucrative demand for Ethanol. As of September 29, Ethanol prices in the North American market were hovering around USD 850 per metric tonne.
At the start of Q3, Ethanol prices continued the bullish trend from the last quarter in the Asian market. The government's target to achieve E12 (12% Ethanol with gasoline), industry focus on environmentally friendly practices, and a change in consumer behavior towards a cleaner lifestyle due to higher per capita income, have all driven the demand for Ethanol for consecutive months. In August, Ethanol prices in India's market remained quite stable while in China, they continued the bullish trend. The high demand for sugarcane in the end-use industry and the diversion from Ethanol to sugarcane products have helped the sugar mills maintain enough margin. Hence, producers have shown reluctance to revise to a lower value quotation. However, the markets in the Philippines and South Korea have conflicted. A drop in Ethanol prices in America, a major exporter of Ethanol, coupled with sluggish demand in the solvent industry, have kept the prices of Ethanol on the lower side in the Philippine and South Korean market. In September, the overall Asian market trended upward, including the Philippines and South Korea. The weak monsoon effect on India's crop production, Black-sea corn supply concerns, and a drop in Ethanol production in the U.S have negatively affected the market sentiments. As of September 29, Ethanol prices in Asian continents have been trading around USD 950 per metric tonne.
In the first half of the third quarter, Ethanol prices in the Eurozone continued to follow the bearish trend of the previous month. The downstream industry's demand for Ethanol has been lower as the blended ethanol policy has not yet been implemented. Moreover, the sufficient availability of the chemical from overseas suppliers forced the Ethanol market price to decrease again at the front-month. A proposed bill by the German environment minister on phasing out crop-based production to fortify Europe’s food security negatively affected market sentiments. The availability of cheaper ethanol from the US, for which the Netherlands has been the fourth-largest export destination, further supported a drop in Ethanol prices. However, Ethanol prices started traveling upwards from September. This is due to an increase in Sugar prices in major Ethanol producing countries like Brazil, as the major sugar producing nations India and Thailand have limited their overseas exports due to plummeting production. The adverse effects of El Nino led to bad weather causing production efficiency loss. The Euro closed at a 5-month low against the dollar, after the ECB’s announcement that they might pause the rate hike cycle. The downstream biofuel industry has been growing steadily since the European Commission has been trying to increase the blending percentage of Ethanol with Gasoline further. Major exporters like the U.S. and Brazil have also raised their quotation prices. As of September 29, Ethanol prices in the Eurozone were hovering around USD 890 per metric tonne.
Ethanol prices in the third quarter continued to follow the bullish trend from the previous month. In the Brazilian market, it has been reported that all feedstocks have been used up and operable biofuel production capacity fell slightly at the end of July 2023. Unica, the Brazilian Sugarcane Industry Association, announced that ethanol production was down for two weeks while sales were up due to high demand in the biofuel industry. Additionally, the Brazilian government's move towards higher ethanol blending in gasoline by 3% and the announcement by Stellantis NV, the world's fifth-biggest automaker, about the production of flex-hybrid vehicles using ethanol and electricity in Latin America's largest economy, has elevated the market. A recent deal in August between Shell and the University of Sao Paulo, Hytron, was disclosed to produce green Hydrogen from Ethanol, which will then be planned for use in buses and trucks. Moreover, erratic weather throughout the July-August monsoon and government restrictions have limited sugar exports in sugar-producing rivals India and Thailand, which have projected a higher demand for Brazilian sugar in the sweetener industry. The resulting decrease in sugar stock and concerning drop in sugarcane production in the upcoming season have led the federal governments to activate embassies in various exporting countries to strengthen political relations and import sugar from them.
For the Quarter Ending June 2023
The prices of Ethanol in the US market have hiked significantly as of Q2, and this was due to increasing downstream demand industry like Fuel and paints. Additionally, the prices of Natural Gas have supplemented the input production cost. Furthermore, increased economic stability and lowered the inflation rate, which came down from 4.9 in April to 3 in June amid the government announcement of the U.S Department of Agriculture's plans to invest up to $500 million to increase the availability of domestic biofuels, created optimistic Ethanol market trend in Q2. Furthermore, an increment in the feedstock corn prices in the US market caused an increase in the prices of downstream Ethanol. Moreover, there was stable demand from the international market. In addition, there was procurement of large orders from the biofuel industry along with plants operating at stable rates to meet domestic and international demand. Thus, at the end of Q2, the prices of Ethanol in the US market were stated at USD 851/MT Ethanol 99% FOB Texas.
In the second quarter of 2023, the prices of Ethanol in the Chinese market have declined constantly at a stable rate. This was due to the slow economic recovery in China amid the deflation problem. Additionally, declining exports in China amid weak demand from the domestic and international markets led to weak demand from the biofuel industry. Furthermore, there was a decrement in demand from the downstream transport and logistic sector amid declining feedstock corn prices, creating an overall pessimistic Ethanol market view. In addition, the plants were operating at a lower rate due to weak domestic and overseas demand. Furthermore, due to peak harvesting season in the US market, there was a free flow of Feedstock corn in the market amid declining coal prices from Australia as it was offering coal at discounted prices, trying to win back consumers and increase international demand, which led to a decrement in the input production cost. Therefore, as of ending Q2 June, the prices of Ethanol in the Chinese market were stated at 819/MT Ex-Shanghai.
As of Q2, the prices of Ethanol have shown declining trends but at a variable rate. As of the beginning of Q2, in the first half, the prices declined at a slightly slower rate. Furthermore, in the second half of Q2, the prices declined amid the euro central bank decided to increase the interest rate it was due to increased interest rate as there was increment to 3.75% as of June. And high inflation led to a decline in demand from the downstream industry like the transportation and logistics sector. In addition, the continued high inflation rate led to a decrement in demand from the downstream industry like the biofuel industry. Furthermore, there was a free flow of inventory from the international market, which led to sufficient inventory levels to meet downstream demand. Moreover, there was a declining trend in PMI as its value in June declined to 43.20, indicating a contraction in the manufacturing sector. Additionally, the prices of Natural gas have declined significantly, leading to a decrement in input production costs. So, at the end of Q2 in June end, the prices of Ethanol in the Netherlands Market were stated at USD 1082/MT FD Rotterdam.
Overall market dynamics of Ethanol in the North American market remained stable on account of a balanced production rate and available stockpile with end-use manufacturing units. USDA figures showed an increase in production rate and increased demand for the commodity in the biofuel production industry. Domestic and foreign demand for the product was mild, and the producer had an abundant stockpile to meet domestic demand. Towards the quarter end, the final price of Ethanol was determined by the tight supply of sugar in the US market, as well as the rising demand from the biofuel and food industries. Senators from the United States were attempting to increase the international market for its Ethanol gas blend. Towards the quarter end, Ethanol prices were observed at USD 755 per MT, FOB Texas.
The overall market dynamics of Ethanol in the Asia-Pacific market declined slightly on account of the fluctuating demand outlook for the product. The Chinese market restarted operations in the country and trading in the foreign market during the Lunar post holidays in the country. End-user manufacturers continued to confront workforce shortages and fewer product inquiries. Manufacturing firms' recently signed orders remained constant while their inventories increased. Several enterprises had reopened at the same time, and supply was increasing. Prices were too high, restrictive downstream demand. Buyers showcased wait-and-watch behavior before placing larger orders towards the quarter's end. Corn market volume in the production area remained strong, but port corn arrival volume increased. At the same time, downstream demand remained static, and buyers were hesitant to place orders. Towards the quarter end, Ethanol prices were observed at USD 895 per MT, Ex-Shanghai.
In the first quarter of 2023, the market prices of Ethanol followed the inclined trend In the European market. Because of the ease of the import, the German providers received the ethanol consignment from the United States with declined transit time. Biofuel continued to be in high demand in the local market throughout the quarter. The observed rise in energy prices raised production costs. Demand for the product from food services, as well as demand for Ethanol blended biofuel. To meet food industry demand and reduce reliance on imported oil, the European government intended to prohibit the use of vegetable oils in the production of biofuel. As a result, demand for the product from ethanol-based biofuel companies, as well as the pharmaceutical and food sectors, has increased, affecting final Ethanol prices on the European market. Towards the quarter end, Ethanol prices were observed at USD 1120 per MT, CFR Hamburg.