NE Asia hydrous ethanol market to stay bearish on weak demand

13 June 2012 05:30  [Source: ICIS news]

SINGAPORE (ICIS)--The hydrous ethanol import market in northeast Asia is expected to remain bearish for the near term as weakening demand and the unstable Brazilian currency continue to weaken overall market sentiment, market players said on Wednesday.

Prices were assessed as $25/cubic metre (cbm) (€20/cbm) lower week on week at $690-710/cbm CFR (cost & freight) northeast (NE) Asia during the week ended 6 June, according to ICIS.   

The Brazilian currency’s exchange rate against the greenback US dollar weakened sharply in previous weeks and is now at real (R) 2.06 against $1.

The hydrous ethanol market experienced a gradual downtrend during most of the second quarter of the year, following lower buy-sell ideas as a result of weak demand.

“A few enquiries were heard, but it is only because players want to know the market direction,” a southeast Asia-based trader said.

Most buyers, who concluded most of their second-quarter requirements early in the year, remain covered with material until July and are only expected to start making enquiries during that month.

“Some traders and end-users in Japan are covered until as late as September, so buying activity is very slow,” a northeast Asia-based trader said.

“The supply of B-grade ethanol in South Korea is slightly long as demand is weak,” added a trader in South Korea.

South Korea and Japan imports both industrial-grade ethanol, which is used in pharmaceutical applications and B-grade ethanol, which is used in the production of alcoholic beverages.

The two importing countries usually consume cane-based hydrous ethanol from Brazil, with some molasses-based material from Pakistan.

According to a few market participants, some buyers are at the sidelines in anticipation of a further drop in prices, while others were heard to be turning to molasses-based product from Pakistan.

However, high freight charges from Pakistan to Ulsan in South Korea are deterring buyers from committing to fresh purchases despite the affordability of Pakistan-origin cargoes.

A 20,000 tonne cargo for delivery in the third quarter was heard to have been concluded early this week at around $800/tonne FOB (free on board) Karachi.

This is equivalent to around $710/cbm CFR Ulsan, after including shipping charges and premiums.

“The volatility of the Brazilian currency is another reason for the weak buying interest. Customers are now waiting for the real to stabilise,” a separate trader added.

($1 = €0.80, $1 = R2.06)


By: Andrea Heng
+65 6780 4359



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