Vietnam cuts ethanol import tariffs from 10 July

Vietnam will lower tariffs on ethanol imports to 15pc for all grades from 10 July, though fuel ethanol trade seems unlikely to increase.

The change cuts tariffs from 17pc for 100pc pure ethanol and 20pc for 99pc or below for any country that does not have a free trade agreement with Vietnam.

Traders pointed to shaky demand as they shrugged off the revisions, which they do not expect to significantly expand fuel ethanol imports.

Vietnam currently blends around 63,000 t/yr of fuel ethanol with gasoline, according to market participants, well short of the 235,000 t/yr required to meet the government's 5pc blend target (E5) established in 2018.

The US exported 7,300t of fuel ethanol to Vietnam in 2019, according to the US Energy Information Administration, while Vietnam's sole domestic supplier Tung Lam produced close to 31,500t. The remaining 24,200t was likely met through US-origin imports arriving via trans-shipment through South Korea, which are not subject to fuel-ethanol tariffs under the countries' bilateral free trade agreement.

Actual demand remains short of the mandate that currently runs on a voluntary basis. Higher-octane 95R is still sold unblended even after pure 92R gasoline was phased out from retail stations nationwide from 1 January 2018 and replaced with an E5 92R blend. Many Vietnamese consumers continue to choose unblended 95R, citing concerns over the efficiency and safety of ethanol-blended gasoline.

A lack of funding has maintained a tight spread between blended and unblended gasoline prices at retail stations and added to consumer apathy. Vietnam's primary oil company and retailer PetroVietnam sold E5 blended 92R at just 690 dong/litre ($0.03/l) less than 95R, at 13,390 dong/l ($0.58/l) on 12 June.

A timeline has yet to materialise as the government continues to mull plans to stop sales of pure 95R and to introduce E5 blended 95R.

By Lauren Moffitt