India may emerge as net ethanol buyer in 2008

31 July 2008 04:50  [Source: ICIS news]

SINGAPORE (ICIS news)--India will emerge as a net ethanol importer in financial year 2008-9 and is expected to buy around 100,000-200,000 tonnes amid a shortfall in domestic production, said ethanol buyers and sellers on Thursday.

India would be importing ethanol after several years of self-sufficiency, said traders. The last time India had imported a huge quantity was in the financial year 2003-4 when the country purchased 400,000 tonnes of ethanol, said a source from an international ethanol trading firm.

The sugarcane output in the coming crop season that starts from October was likely to be 10-15% lower than the last crop, said an ethanol producer.

Demand however, has been strong especially due to the fuel-blending programme that started in the country last year.

Anhydrous ethanol, used for gasoline blending is being supplied to oil companies at Indian rupees (Rs) 21.50/litre ($0.50/litre), in a three-year agreement signed between ethanol sellers and oil companies in 2007. At that time prices of industrial hydrous ethanol were lower at Rs17-18/litre.

However, current domestic hydrous ethanol prices have surged to Rs25/litre ex-distillery amid the prevailing tight supply, a sharp increase from Rs20-21/litre in June, said local ethanol players.

But until now, it has not been easy to import large volumes at workable prices due to concurrent tight supply in the world’s largest exporting country Brazil, said buyers.

One 20,000 tonne cargo of hydrous ethanol from Brazil had been heard fixed for August shipment in the mid-$700s/tonne CFR (cost and freight) west coast India, said a trader.

Asian ethanol prices had risen from $650/tonne CFR in April to around $800/tonne CFR towards the end of July due to tight global supply, surging gasoline values and increase in costs of feedstock like corn and molasses.

Hydrous industrial ethanol is used as a feedstock in India to produce chemicals like acetic acid, ethyl acetate and mono ethylene glycol (MEG). Anhydrous ethanol is used for gasoline blending to the tune of 5% in India.

($1 = Rs42.5)

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By: Anu Agarwal
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