US ethanol shipments to China pick up

China will receive close to 80,000t of US ethanol in January on top of the 30,000t that has landed this month, even as the Chinese government slows its costly gasoline blending programme.

Two vessels possibly shipping fuel ethanol from the US are scheduled to arrive at unknown ports in China between 20-25 January, according to Vortexa. The Loukas 1 and FPMC 29 are handymax vessels shipping 40,000t and 37,000t of ethanol from Texas' Galveston to China, according to shipping brokers.

Another 30,000t shipment of fuel ethanol has already arrived at a port in China but is waiting to offload because of bad weather, according to market participants. Large-scale Chinese state-owned oil and agribusiness firms are key ethanol buyers and possibly have bought the cargoes, although neither have been confirmed.

Small trading firms offered December-arrival fuel ethanol cargoes to China at $530/t cfr but were unable to supply the 30,000-40,000t that buyers requested. Such large shipments incur a substantial tax bill at the border under the 45pc import tariff imposed on US ethanol as a result of tense US-China relations.

Chinese domestic fuel ethanol prices have risen sharply since April driven by ballooning corn feedstock costs, reaching around 6,300 yuan/t ($965/t) at the end of this month from April's low of around Yn4,700/t, according to market participants. This has pushed open the arbitrage for delivered US volumes.

By Lauren Moffitt