Commodities 2023: Asian Ethanol to Navigate Inflationary Concerns, Policy Changes

Asia, Brazil, Business News/Analysis, Feedstocks, Field/Orchard/Plantation Crops/Residues, India, Indonesia, Marketing/Market Forces and Sales, Opinions, Philippines, Policy, Vietnam

January 3, 2023

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by Shien Ern Tan (S&P Global) Fuel ethanol to face feedstock, inflation challenges; Brazilian sugarcane crop and fuel policies to impact Grade B; Asia aims for higher ethanol usage — The Asian ethanol market is expected to feel the heat from the fight against inflation by its Western counterparts, crimping its post-pandemic recovery and new commitments to boost alternative fuel resources amid fundamental shifts in the energy and agriculture sector from the Russia-Ukraine crisis.

Fuel ethanol demand is expected to pick up as Asia starts to reopen its borders but local buyers anticipated some resistance as nations grapple with economic headwinds.

A Philippines-based trader said: “Schools have resumed full-time, in-person classes since the pandemic began and I believe soon it will be the same for offices. This would mean higher gasoline consumption as activity resumes. However, if global interest rates keep increasing, local demand and spending will drop.”

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The US remains the largest exporter of corn-based fuel ethanol.

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Rains across Brazil’s Central South region in December were causing most mills to end crushing for the 2022-23 season sooner than last year. Therefore, local analysts and traders were expecting cane left in the fields to be harvested earlier next season in March rather than April.

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The Indonesian Ministry of Energy and Mineral Resources and the Bandung Institute of Technology Research Team prepared a short-term target to introduce 5% ethanol or E5 mixtures in capital Jakarta and key city Surabaya in the next three years, local media reported Dec. 7.

In its Strategic Roadmap to Accelerate Bioethanol Implementation in Indonesia, there were medium (5 years) and long-term targets. In the medium term, the government aimed to increase bioethanol blending to E10 and expand the bioethanol program to the Java region, where fuel consumption is highest. By 2031, the blend could rise to 15% bioethanol in fuel and distributed nationally.

Additionally, Vietnam aims to develop a green transport system in its push for net-zero emissions by 2050. Under the Decision No. 876/QD-TTg signed by Deputy Prime Minister Le Van Thanh on July 22, the country planned to have 100% of road vehicles use E5 gasoline by 2030.

“This move will improve the acceptance rate of ethanol in Vietnam as there is no distinction between the different gasoline grades”, a US Grains Council representative said. READ MORE

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