FocusAsian anhydrous ethanol prices drop on weak export demand

13 July 2012 08:32  [Source: ICIS news]

By Andrea Heng

SINGAPORE (ICIS)--Asia’s anhydrous ethanol prices are on a decline as a result of weak demand from a key importing country, the Philippines, despite the recent gains in corn futures in the US, market sources said on Friday.

The weak demand is leading suppliers in Thailand, a major producer of molasses-based anhydrous ethanol in the region, to redirect their cargoes to the domestic market, where the government plans to implement a fuel-blending policy in October.

The prices of anhydrous or fuel-grade ethanol were assessed as down by $20-25/cbm (€16-20/cbm) to $650-670/cbm CFR (cost & freight) Philippines on 11 July, according to data from ICIS.

Market players indicated softer buy-sell ideas during the week despite stronger corn futures in the US.

Corn futures traded in the US determine the movement of ethanol futures, which in turn affect overall ethanol prices.

Corn futures on the Chicago Board of Exchange were settled at $7.506/bushel during the week ended 11 July, down by 10.2 cents from the previous day.

However, the settlement was up from $7.186/bushel on 3 July.

An offer of US-origin corn-based anhydrous ethanol was heard at $660/cbm FOB (free on board) Chicago, but the CFR southeast Asia (SEA) equivalent at around $740/cbm was deemed too high by buyers, who indicated ideas at around $650/cbm CFR SEA and below, a trader said.

Sellers in southeast Asia, whose price ideas at $670-680/cbm CFR SEA were unable to attract buying interest amid blenders’ ample inventories, have started redirecting their product to the domestic Thai market, where they are able to fetch competitive prices.

The last deal heard in the Thai local market was concluded at $650/cbm ex-factory in late June, according to a major supplier.

“Oil companies in Thailand are willing to pay closer to our selling idea as they need to stock up ahead of the government policy for fuel-blending, so we would rather stop exporting for the time being,” the supplier said.

A recent buying tender that was heard concluded at around $638/cbm CFR Philippines has led buyers to pressure sellers to lower their prices.

However, producers are remaining firm in their price indications, citing squeezed margins.

“The buying ideas at $600-610/cbm FOB SEA we heard from the market are too low for us to make a margin, plus the buyers are not in a hurry to purchase cargoes for the remainder of their quarterly requirements,” a second supplier said.

($1 = €0.82)

By: Andrea Heng
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