FocusAsia ethanol tight on Brazil shipments delay

07 May 2008 09:35  [Source: ICIS news]

By Anu Agarwal

SINGAPORE (ICIS news)--A delay in ethanol shipments from Brazil amid heavy rains in the sugarcane growing centre-south region has resulted in a tight market in Asia, boosting regional price ideas, said ethanol buyers and sellers on Wednesday.

Brazil offers were pegged at $480-490/cubic metre for hydrous ethanol - the grade mostly used in beverage alcohol and other industrial applications - some 8% higher than offers last month.

This price would translate to around $700/tonne CFR (cost and freight) Korea/Japan.

A lot of cargo had been booked for May but logistics were bad currently due to the rains in Brazil and it was hard to get product to Asia for June arrivals, said regional ethanol traders.

The high offers had sidelined most large buyers in Asia who were reluctant to buy despite the short-term tightness, said a northeast Asian trader.

“We need to buy but current prices are too high,” he added.

“Everyone knows a large harvest is coming in Brazil but Asia may not see much volumes during the next two months,” said Henri Bardon, managing director of ethanol trading firm Vertical.

Other Asian sellers such as Pakistan were also mostly booked for the next two months and limited spot cargoes are available for Asia, said ethanol traders.

Late April deals from Pakistan for extra neutral alcohol (ENA) had been fixed for European destinations at $640-645/tonne FOB (free on board) Karachi.

However, current offers from Pakistan were heard around $670/tonne FOB Karachi which were considered too high by Asian buyers, since they would translate to $720-730/tonne CFR Korea/Japan, said traders.

A strong Brazilian currency versus the US dollar and surging gasoline prices had also underpinned strong ethanol prices this year, said ethanol traders.

Hydrous ethanol is used as a standalone fuel in flex-fuel vehicles in Brazil while anhydrous ethanol is used for blending with gasoline.

In Asia, buyers in Korea/Japan buy ethanol mostly for beverage applications while sporadic buying also takes place in Taiwan, the Philippines and Australia for gasoline blending.

India and China are large producers and users of ethanol in all applications including gasoline blending but they are not so active in the regional markets.

Pakistan and Thailand produce and export ethanol but the majority of imports into Asia are from Brazil.

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By: Anu Agarwal
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