FocusAsia ethanol seen firming on high Brazil values, snug supply

11 June 2009 04:48  [Source: ICIS news]

By Anu Agarwal

SINGAPORE (ICIS news)--Asian ethanol prices were expected to firm in the coming months on the back of rising offers from Brazil and generally snug regional supply, buyers and traders said on Thursday.

Ethanol offers from Brazil have risen in the past few days on the back of the recent sharp appreciation of the Brazilian reais (R) versus the US dollar. The Brazilian reais was pegged at 1.94 to the US dollar on Wednesday, stronger by around 8% when compared to early May when it was trading at 2.1 to the US dollar.

This had resulted in offers for ANP hydrous ethanol going up to $360-370/cbm Free on Board (FOB) (€259-266/cbm) Santos this week from $310-330/cbm FOB Santos in early May.

"Offers for B-grade hydrous ethanol are close to $380/cbm FOB Santos, which works to around $470/cbm CFR Korea," a regional ethanol trader said.

B-grade ethanol is used for making beverage alcohol in Korea and Japan.

Although most large buyers in northeast Asia were resisting the higher offers, a 5,000 tonne cargo was heard changing hands at $470/cbm CFR Korea, the regional trader added.

This may have been because prompt supply is tight and there are not many options for Asian buyers, said other traders.

Other buyers were still holding out for $450-460/cbm CFR Korea for Q3 arrivals although no fixtures were heard.

Ethanol prices in Brazil, the world’s largest exporter, had been languishing in the past several months as many sellers sold cargoes at low prices to raise cash amid tight credit conditions. A good sugracane crop and ample supply were also keeping a lid on ethanol values.

However, with the recent sharp currency fluctuations, as well as surging energy complex values, prices have reversed the trend.

“I believe that ethanol prices might tough $500/cbm CFR Asia in the coming weeks,” said a northeast Asian ethanol trader.

Meanwhile, Asian sources of ethanol like Thailand and Pakistan had very limited supply amid high feedstock molasses prices due to a big shortfall in sugarcane production this year.

($1=€0.72)

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By: Anu Agarwal
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