FocusAsia’s hydrous ethanol offers soft on weak demand

20 June 2012 04:50  [Source: ICIS news]

By Andrea Heng

SINGAPORE (ICIS)--Asia's offers of hydrous ethanol have declined from last week and this is likely to continue as traders and end-users are covered until the end of this year’s third quarter, market sources said on Wednesday.

The latest offers of hydrous grade ethanol were at the mid-to-high $600s/cbm (around €474/cbm) CFR (cost & freight) Ulsan for shipment in August, depending on the cargo’s origin, they said.

Sellers have lowered their offers by $30-60/cbm because of weak demand from end-users.

Last week, deals and discussions for hydrous ethanol were at $690-710/cbm CFR Ulsan.

“Traders are placing bids, but none of them are confirmed because they are only checking the market direction and sentiment,” a trader said.

“Buyers are purchasing on a hand-to-mouth basis and not committing to term cargoes, so only small volumes are being moved,” the trader added.

Most buyers of hydrous ethanol, which are mainly from Japan and South Korea, are fully stocked until the end of this year's third quarter, thus preventing any price gains.

Storage tanks in South Korea’s Ulsan port were said to be full, with traders facing difficulty in moving ethanol cargoes to the domestic market.

Last week, two parcels comprising a total of around 3,000cbm of hydrous ethanol were sold in the low $700s/cbm CFR (cost & freight) Ulsan for delivery in July, according to market sources.

A separate cargo comprising 2,000-3,000cbm of hydrous ethanol was transacted at $670-680/cbm CFR Ulsan for delivery in June-July, they said.

The cargoes were of Thai and Indonesian origin, they added.

Both countries were said to have product availability, but are considering focusing on their domestic markets in view of the weak export demand.

In Brazil, a lower yield of cane-based ethanol was forecast early this year because of unfavourable weather conditions and tight funding for cane farmers in the country’s centre-south, where 90% of sugarcane crushing is done.

Market sources said the expected tight supply may cause a rise in ethanol prices, but increased competition from gasoline prices has led to a slight drop instead.

“The supply of Brazil-origin cane-based hydrous ethanol, which was earlier expected to tighten, is not the main issue now. Most players are concerned about the depreciation of the Brazilian real against the US dollar, which makes exporting unattractive,” a second trader said.   

“However, US-origin ethanol is expected to firm slightly this week, so it may boost the prices of its South American counterpart,” the trader added.

According to the sources, market players are optimistic about the fourth quarter of the year, when demand is expected to strengthen amid low stock levels.

“Any orders that we receive from July onwards will probably be centred on fourth-quarter delivery parcels,” a third trader said.

Industrial-grade hydrous ethanol is used in pharmaceutical applications, while B-grade hydrous ethanol is used in the production of alcoholic beverages.

($1 = €0.79)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Andrea Heng
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