NEW YORK (Reuters) – Three ships carrying ethanol were off the U.S. Gulf Coast to China, three trade sources told Reuters on Monday in a sign that fuel exports were rising sharply from the United States to the country.
The shipments could exceed the total amount of U.S. ethanol China imported last year, which is a positive development for the U.S. ethanol industry, which has seen a decline in demand due to the coronavirus pandemic and the trade war between the U.S. and China. has.
The sources each have about 30,000 tons, or about 240,000 barrels of ethanol, according to the sources, although the exact amount of renewable fuel on board was not immediately clear.
GRAPH: US ethanol exports to China compared to the rest of the world –
It was also unclear when the cargo would arrive in China, which buys U.S. ethanol for fuel to merge with gasoline. One source said at least two of the tankers left at the end of February.
The three cargoes should be among vessels previously discussed, and more are expected to be shipped to China in the coming months, three traders in Asia said.
In January, Ray Young, chief financial officer of Archer Daniels Midland Co., said China had purchased about 200 million gallons of U.S. ethanol (4.76 million barrels) for the first half of 2021.
That would equate to about 15-20 vessels with renewable fuels, the traders said, especially last year when US ethanol prices reached their lowest point.
Traders said COFCO and Sinopec were among the buyers of the U.S. cargo.
Two cargoes discussed by COFCO have already arrived in China recently while Sinopec shipped imported ethanol to the domestic market, said one source in China familiar with the ethanol trade.
GRAPH: US ethanol and gasoline prices –
“Local grain prices continue to rise, raising domestic ethanol prices and creating a huge profit margin for ethanol imports,” said the source, who did not want to be named because he was not authorized to speak to the media. do not speak.
COFCO and Sinopec did not immediately respond to a request for comment.
While China imported an annual record of 4.72 million barrels of U.S. ethanol in 2016, it has not recently been a major importer. However, the sharpening of the stock of domestic wheat used to produce the biofuel, coupled with relatively cheaper US prices, has fueled the need for imports.
“Domestic wheat is too expensive,” said a trader in China with an international trading house, which made imports profitable.
U.S. ethanol to China on a CIF basis is currently quoted at about $ 700 per tonne, while local ethanol in March is a little over $ 1,000 per tonne.
If all three tankers were full, the cargo would be equal to about 720,000 barrels of ethanol, more than the 506,000 barrels of American ethanol shipped to China throughout 2020.
The increase in exports comes as the U.S. ethanol industry tries to return to normal production levels following the destruction of demand due to the pandemic. Ethanol production increased to 849,000 barrels per day in the week to February 26, from a record low of 537,000 bpd last April, the EIA data showed.
The United States and China signed a trade agreement in January 2020, in which China promised to buy more US, domestic and manufactured goods.
Reporting by Stephanie Kelly in New York and Hallie Gu in Beijing; Edited by Marguerita Choy and Jacqueline Wong