FocusAsia hydrous ethanol supply shifting from Brazil to alternatives
19 September 2012 08:13 [Source: ICIS news]
By Andrea Heng
BANGKOK (ICIS)--Asia's hydrous ethanol supply is shifting to alternative sources as traditional supplier ?xml:namespace>Brazil faces crop problems and subsequently limited domestic stock, ethanol trade consultants said on Wednesday.
Brazil historically supplied 80% of global industrial ethanol, but low investment, poor crop and rising fuel-grade demand locally has led buyers to look for alternatives, said Paul Roberts, sales director at Alcotra Singapore.
Key importing countries Japan and South Korea will continue to turn primarily to Pakistan and Thailand for their B-grade hydrous ethanol supply into next year, according to Ray Hogger, director of the ethanol division at BS Global Resources.
Hogger was speaking at the third CBI Global Ethanol Focus in Bangkok on 19-20 September.
The shift is coming as a result of forecasts of higher prices from Brazil on the back of constant feedstock problems seen in the country's sugarcane sector, where crop funding and inclement weather has disrupted cane crushing for most of this year, Hogger added.
Hydrous or B-grade ethanol is used in the production of alcoholic beverages.
"There are reduced volumes from Brazil, so Asia will be dependent on Pakistan and, hopefully, Thailand if the government makes a firm decision on its ethanol-gasoline mandate," Roberts said.
The government in Thailand is planning to announce a fuel ethanol-blending mandate, which was delayed throughout this year and is likely to be finalised in 2013. Some hydrous ethanol will come out of producing the fuel grade.
Alternative sources of the B-grade ethanol will exclude the US, where corn prices have sharply risen on the back of severe drought that damaged crop yields, and Europe because of unviable freight logistics and high shipping costs.
"Australia currently has some surplus and the market saw some exports from there going to Asia, but volumes are small," Hogger added.
Another option is Indonesia, but exports from the country so far are mainly of the fuel grade.
"In Thailand, focus is on producing the fuel grade, which is also known as anhydrous ethanol, for the local market. So it's uncertain if there will be expected hydrous exports to importing countries," Hogger said.
That leaves Pakistan as the main supplier this year and the next, industry sources said.
The country looks set to be the main source of sugar-based ethanol, with over 80 sugar mills and 19 distilleries to produce around 550,000 tonnes/year of ethanol.
Pakistan is export oriented as ethanol demand in the largely Muslim country is low, according to Hogger.
In addition, molasses prices are on the rise while prices of tapioca, also known as cassava, are already too expensive for ethanol producers, Roberts added.
Molasses is a sugarcane-based feedstock and cassava is also known as tapioca, which is also a feedstock for producing ethanol.By: Andrea Heng+65 6780 4359
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