Pakistan is set to regain ground in the Asian beverage-grade ethanol market amid recent surge in Brazilian ethanol -- the predominant source of grade B product currently, market sources said Tuesday.
With several Pakistani sellers set to attend a major industry conference to be held in Budapest this week, participants are awaiting for clearer indications to emerge as deals are concluded during the gathering.
Brazil ethanol prices surged after state-owned oil company Petrobras raised gasoline prices at the pump by 6% in early October.
The move prompted motorists to switch to hydrous ethanol as a more affordable alternative, leading to a sharp rise in domestic demand.
Prices were also well-supported as total supply is set to fall for the remainder of this year with the intercrop season coming into swing.
Platts assessed the CFR Ulsan beverage-grade ethanol marker at $550/cu m Monday.
This compared to $485/cu m on October 1, representing an increase of over 13% over the month.
Availability in the export market is expected to remain thin with loadings possible only in December at the earliest, said sources.
"The Brazilians are still focused on meeting domestic demand," said a major Asian trader.
Conversely, while Pakistan is currently experiencing a shortage of molasses feedstock, supply is expected to rebound when the country restarts its sugar harvest in the next couple of months.
Recent offers of Pakistani-origin ENA cargoes were heard at $650-$680/mt for December loading, with sources pegging the tradable value at around $650/mt, equivalent to $513/cu m.
FREIGHT RATES IMPORTANT FACTOR
Whether Pakistan is able to compete against Brazil for North Asian markets depends on freight rates.
Sources pegged the freight rate to ship 8,000-10,000 cu m parcels on the Karachi-Ulsan route at around $70/mt, and to ship smaller parcels of 4,000 cu m at $80-$90/mt.
Despite current economics still favoring Brazil by around $20-$30/cu m, prolonged supply tightness in the South American country and greater availability in Pakistan could see the latter gaining an upper hand.
The shorter voyage time from Karachi -- 22-25 days compared to the 45-60 days it takes from Brazil's Santos -- is another factor favoring Pakistan, especially for buyers looking for prompt cargoes.
However, a local producer said there were few inquiries from North Asian buyers so far.
"I've not heard from the major trading houses for some time already," the producer said.
He added that China was an exception as cargoes headed there are exempt from value-added tax, but volumes flowing into the regional powerhouse had been dwindling of late.
China imported 23,258 cu m of ethanol from Pakistan in August, customs data show, down 38% from August.
An European trader also pointed out that end-users would still prefer to buy Brazilian ethanol, and that an advantage in price alone might not be enough to entice them.
"It is still still easier to load from Brazil due to logistical reasons, and Pakistani cargoes also have to be reblended for use in the South Korean market," he said.
Hydrous ENA ethanol sold from Pakistan has a purity level of 96%, and has to be diluted to 95% purity for use in beverage-making.
