NEW YORK (Reuters) – Three ships carrying ethanol were heading to China from the US Gulf coast, three commercial sources told Reuters on Monday, in a sign that fuel exports had risen sharply from the United States to the country.
Shipments may exceed the total amount of US ethanol that China imported last year, a positive development for the U.S. ethanol industry, which saw a drop in demand due to the coronavirus pandemic and the US-China trade war. .
The ships each have a capacity of about 30,000 tons, or about 240,000 barrels of ethanol, the sources said, although the exact amount of renewable fuel on board was not immediately clear.
GRAPH: US ethanol exports to China from the rest of the world –
It was also unclear when the cargo would arrive in China, which buys ethanol from the United States to mix fuel with gasoline. A source said that at least two of the oil companies left at the end of February.
The three goods should be among the ships booked earlier and more are expected to be shipped to China in the coming months, three Asian traders said.
In January, Archer Daniels Midland chief financial officer Ray Young said China bought “about 200 million gallons” (4.76 million barrels) of US ethanol in the first half of 2021.
That would equate to about 15-20 ships of renewable fuel, traders said, booked mainly last year, when US ethanol prices hit their lowest point.
COFCO and Sinopec are among US buyers of goods, traders said.
Two COFCO-reserved goods have already arrived in China recently, while Sinopec is shipping imported ethanol to domestic markets, a Chinese source familiar with the ethanol trade said.
GRAPH: US ethanol and gasoline prices –
“Domestic grain prices continue to rise, leading to rising domestic ethanol prices and creating a large profit margin for ethanol imports,” said the source, who declined to be named because he was not allowed to speak to the masses. mediate.
COFCO and Sinopec did not immediately respond to faxes requesting comments.
While China imported an annual record of 4.72 million barrels of ethanol from the US in 2016, it was not a major importer recently. However, the tightening of the supply of domestic maize used to make biofuel, coupled with comparatively lower US prices, have boosted the need for imports.
“Domestic corn is too expensive,” said a Chinese trader with an international trading house, making imports profitable.
US ethanol to China on a CIF basis is currently priced at about $ 700 per tonne, while domestic ethanol in March is just over $ 1,000 per tonne, according to the trader.
If all three tanks were filled to capacity, the cargo would be equivalent to about 720,000 barrels of ethanol, more than 506,000 barrels of US ethanol shipped to China by 2020.
Increased exports come as the US ethanol industry tries to return to more normal levels of production following the destruction of demand due to the pandemic. Ethanol production increased to 849,000 barrels per day per week until February 26, from a record low of 537,000 bpd in April last year, EIA data showed.
The United States and China signed a trade agreement in January 2020, in which China pledged to buy more US farms, energy and manufactured goods.
Reporting by Stephanie Kelly in New York and Hallie Gu in Beijing; Editing by Marguerita Choy and Jacqueline Wong