FocusAsia’s hydrous ethanol prices to be stable-to-firm on low supply

02 May 2012 05:51  [Source: ICIS news]

Sugarcane crops are used in making ethanol.SINGAPORE (ICIS)--Asia’s hydrous ethanol prices are expected to remain at their current levels with some firming up expected in the third quarter because of tightening supply from Brazil, market sources said Wednesday.

Sugarcane production in Brazil for 2012 – a major supplier of ethanol – is expected to be 602m tonnes, according to government estimates.

However, market players said Brazil is likely to produce just above 500m tonnes of sugarcane, an ethanol feedstock, in 2012 because of unfavourable weather conditions.

A persistent drought has plagued the country since late 2011, according to media reports. 

In addition, there has been a larger volume of ageing cane crop, making the crop turnover slower, the reports said.

“The [ethanol] supply will be tight because of these two factors, but not as bad as that in 2011,” a southeast Asia-based ethanol trader said.

According to the Brazilian Sugarcane Industry Association (UNICA), a total of around 509m tonnes are expected to be produced, which is 3.19% higher than the previous harvest but still lower than the government’s estimate.

In 2011, Brazil’s total sugarcane production was at 571.4m tonnes, 501.4m tonnes of which were produced in the central-south region, the country’s largest sugarcane producing region, the UNICA survey showed.

As a result of the low harvest at the time, the prices of hydrous ethanol for export to countries such as Japan and South Korea were as high as $910/cbm (€691.6/cbm) CFR (cost & freight) northeast (NE) Asia in September 2011.

In 2012, the market for hydrous B-grade ethanol started on a firm note with offers at as high as $820/cbm CFR NE Asia, but prices gradually declined, according to data from ICIS.

During the later part of the first quarter, buying demand slowed down because of comfortable inventory levels among customers, and sellers lowered their prices as a result of the weak demand to spur buying interest.

Over the last two weeks, offers of Brazilian hydrous ethanol have hovered at $770-780/cbm but buyers’ response has been weak this week because major buyer Japan is closed for the Golden Week holiday.

In addition, the depreciation of the Brazilian real (R) to R1.88 against the US dollar from R1.82 two weeks ago has made it unviable to sell ethanol at high prices.

($1 = €0.76)

By: Andrea Heng
+65 6780 4359

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