Exclusive: three ships carrying US ethanol head to China – sources

NEW YORK (Reuters) – Three ethanol-carrying vessels were heading to China from the U.S. Gulf Coast, three trade sources told Reuters on Monday, in a signal that fuel exports were rising sharply from the U.S. in the country.

Shipments could exceed the total amount of U.S. ethanol that China imported last year, a positive development for the U.S. ethanol industry, which has seen declining demand due to the coronavirus pandemic and the trade war between the United States and China.

The ships have a capacity of about 30,000 tons, or about 240,000 barrels of ethanol, sources said, although the exact amount of renewable fuel on board was not immediate.

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 US ethanol to combine fuel with gasoline. A source said at least two of the tankers left in late February.

The three cargoes should be among the previously booked ships and more are expected to be shipped to China in the coming months, according to three traders based in Asia.

In January, Archer Daniels Midland Co. chief financial officer Ray Young said China had bought “approximately 200 million gallons” (4.76 million barrels) of U.S. ethanol during the first half of 2021.

That would equate to about 15-20 renewable fuel vessels, traders said, mostly booked last year, when ethanol prices in the U.S. reached their lowest point.

COFCO and Sinopec were among the buyers of U.S. cargoes, traders had said.

Two cargoes booked by COFCO have already arrived in China recently while Sinopec was sending 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, which has pushed up domestic ethanol prices and created a large profit margin for ethanol imports,” said the source, who rejected his name already. who was not allowed to speak to the media.

COFCO and Sinopec did not immediately respond to faxes seeking comments.

Although China imported an annual record of 4.72 million barrels of ethanol to the US in 2016, it has recently not been a major importer. However, the narrow supply of domestic corn used to make biofuel, along with comparatively cheaper prices in the United States, has led to the need for imports.

“Domestic corn is too expensive,” said a Chinese trader with an international trading house, which makes imports profitable.

Currently, US ethanol in China according to the CIF stands at around $ 700 per tonne, while domestic ethanol in March is just over $ 1,000 per tonne, according to the trader.

If all three tankers were full, the cargoes would amount to about 720,000 barrels of ethanol, more than the 506,000 barrels of U.S. ethanol shipped to China throughout 2020.

The increase in exports comes as the U.S. ethanol industry tries to return to more normal production levels after the destruction of demand by the pandemic. Ethanol production has risen to 849,000 barrels a day during the week through Feb. 26, from a record low of 537,000 bpd last April, according to EIA data.

The United States and China signed a trade agreement in January 2020, in which China pledged to buy more American agricultural, energy, and manufactured goods.