Trade Resources Industry Views Southeast Asian Ethanol Producers Face a Short Window for Exports

Southeast Asian Ethanol Producers Face a Short Window for Exports

Southeast Asian ethanol producers face a short window for exporting biofuel to the Philippines as the previously high US prices that created an arbitrage for them in February and March are expected to fall, ethanol traders said Monday.

Producers in Thailand and Vietnam are offering cargoes for May lifting around $730-740/cubic meter FOB, against traders' bids heard at and below $700/cu m FOB.

Ethanol traders turned to regional supply including Indonesia when US ethanol prices rose in February and March and made cross-Pacific deliveries to the Philippines at $890-990/cu m CIF from April to June unworkable.

A trading house was heard to have secured four months' supply from an Indonesian producer at $610-630/cu m FOB, while another trader was heard to have bought Vietnamese ethanol in tender at $700/cu m FOB for second-half April lifting.

A Thai producer from Sa Kaeo province said it could offer export cargo from mid-May around $730/cu m FOB.

"Last year, I had zero stock [to export]," he said. "This year, I have enough build stock and put into tanks for export."

Another Thai producer from Nakhon Sawan province said it might consider selling at $720/cu m FOB, "but not $690/cu m FOB -- that is below cost."

"I don't understand why that producer sold at that price," he said, referring to Ubon Bio Ethanol, which market sources said sold 3,000 cu m in February at $690/cu m FOB to a trader.

Other Thai producers and ethanol traders said the Ubon Ratchathani producer's stock was probably old.

The domestic ethanol price in Thailand is about Baht 28.66/liter or $886/cu m FOB, Thailand's Energy Policy and Planning Office said on its website Monday.

"The domestic market pays more than the export market," said a Singapore-based trader. "But with only 30-40% of production utilized for the domestic market, they might as well use this idle capacity to export."

However, traders said the arbitrage to export to the Philippines might not be open for long, given slipping US ethanol prices and a new US corn crop ready for crushing in September.

"Those [regional] prices at $730-740/cu m FOB won't work if you add freight -- say $40-50/cu m -- especially if the US is coming off," said a second Singapore-based trader.

The structure of the US ethanol curve reverted to backwardation in April, which means CIF Philippines prices are expected to be progressively lower from July, barring unforeseen circumstances, traders said.

"The cold weather which caused a lot of logistics problems in January-March would be gone," said a third Singapore-based ethanol trader. "Railcar tightness would ease soon, and we should expect cheaper [supply] in August, September -- though not $580s/cu m CIF like in November, December -- but $670s/cu m CIF or thereabouts."

Thailand exported 12,783/cu m of ethanol to the Philippines in April 2013, according to Thai customs data.

Spot ethanol supply available for export from Thailand tightened last year when the Thai government phased out 91 RON gasoline sales in January.

The policy forced more than 1.5 million vehicles and small farm machines to turn to the more expensive 95 RON gasoline or a blend of 91 RON gasoline and 10% ethanol. The shift made Thai producers focus on the domestic market, where their fuel fetched higher prices than in the export market.

Source: http://news.chemnet.com/Chemical-News/detail-2295865.html
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Southeast Asia Ethanol Producers Face Short Export Window as US Prices Fall
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