Commodities 2021: Fuel Ethanol’s Fortunes in 2021 Hinge on Policy Edicts in Philippines, China

Business News/Analysis, Canada, China, Marketing/Market Forces and Sales, Opinions, Pakistan, Philippines

December 29, 2020

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by Donavan Lim (S&P Global Platts) Philippines’ local buying requirements seen falling in Q1; China’s imports from US could resume if tensions ease; Higher Grade B prices likely for Ulsan buyers in 2021 — A rise in fuel ethanol imports could be on the cards for the Philippines in 2021 if the country’s domestic consumption quotas are lowered, while the impact of the Biden presidency on China’s willingness to resume large-scale fuel ethanol imports from the US is proving harder to discern.

Import prices fell further below domestic prices in the Philippines in 2020, but lockdowns to contain the spread of COVID-19 in Manila and other major cities considerably reduced demand for fuel ethanol over the same period.

The Philippines’ local monthly allocations or LMAs that require oil companies to purchase a fixed volume of domestically-produced fuel ethanol each quarter before turning to cheaper imports had been on a steady uptrend over 2018, 2019 and into 2020 before the impact of the pandemic prompted a major reversal in Q4.

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Aside from the Philippines’ import requirements, the other key question in the ethanol market in 2021 is, will China offtake US ethanol?

Traders and market participants had been fervently hoping throughout 2020 that phrase one of the China-US trade agreement would see China returning to buying substantial volumes of US ethanol. Instead, China became an exporter of ethanol in the year for disinfectant purposes amid the pandemic.

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In Pakistan, producers are pegging ENA grade ethanol in bulk at above $900/mt KOB Karachi for Q1, equating to over $700/cu m CFR Ulsan, a price level uncompetitive in Northeast Asia against Brazilian ethanol at $500-$600/cu m.

With buyers in Europe covered until Q1 2021 and Far East buyers until Q2 unwilling to chase offers for Pakistani ethanol, it is likely Pakistan’s ethanol prices will decline in order to find willing buyers.

Sales of Pakistani ethanol surged in 2020 on the back of the unprecedented demand for disinfectant worldwide, with prices of ENA grade ethanol hitting more than $1,400/mt FOB Karachi at times. Such demand is unlikely to be repeated in 2021. READ MORE

GROWTH ENERGY EXPECTS CANADA TO REMAIN A TOP DESTINATION FOR U.S. ETHANOL (Brownfield Ag News)

Report: Ethanol producers have lost $3.8 billion to pandemic (High Plains Journal)

US ethanol shipments to China pick up (Argus Media)

Oil firms passing on P0.80/liter ethanol blend cost to motorists (Manila Bulletin)

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