"Endless Fall” When will the Inflection Point of the Ethanol Market Appear?

"The domestic ethanol market opened a downward channel in October, the supply in the main producing areas is relatively sufficient, the downstream demand is average, and the price of raw corn continues to weaken to a low point due to the supply of higher volume, and the cost side is negative. The bearish mentality of the market has increased, and the downstream procurement volume is limited, and the rigid demand procurement is basically maintained. After the downstream demand for fuel ethanol weakened, enterprises adjusted the output pattern and the output of edible ethanol increased. Under the influence of a number of negative factors, ethanol prices continued to weaken. As of press time, the domestic ethanol price in Heilongjiang is 6200-6400 yuan/ton, down 400 yuan/ton from September 28, the price of general-grade ethanol in Jilin is 6300-6400 yuan/ton, down 400 yuan/ton from September 28, the price of high-grade ethanol in Henan is 6700 yuan/ton, down 300 yuan/ton from September 28, and the price of general-grade ethanol in East China is 6750 yuan/ton, down 400 yuan/ton from September 28. At present, affected by snowfall, the freight has risen slightly, and the freight rate sent by a factory in Heilongjiang to a terminal factory in Shandong has increased by 30 yuan/ton.

When will the ethanol market break the continued weakening trend?

Cost side: the price of raw corn continued to weaken, the price fell to a low level, farmers were reluctant to sell at a low price, the temperature dropped and was conducive to the preservation of grain, the purchase price of chemical and feed just needed to bottom out, and the price of by-product DDGS also bottomed out with the rise in corn prices. Although the cost side has risen a little, the overall support is limited, and if the price of corn rises sharply, the cost side is expected to support the price increase trend of ethanol.

However, from the perspective of enterprise production profits: although the price of corn is weakening, there is still profit space for corn ethanol production. If there is a possibility of weakness under the positive shipment mentality of the enterprise, there are rumors in the market that the cost of corn ethanol in Northeast China is below 6,000 yuan/ton, if true, there is room for decline.

Under the influence of high pressure on the cost side, the overall start of cassava ethanol in East China has dropped sharply, only a few main production enterprises and enterprises with downstream supporting devices have started normal operations, and other entire lines have been shut down, and the amount of corn ethanol purchased in Northeast China has increased. Good for corn ethanol shipments in Northeast China. However, the recent snowfall weather is more concentrated, and the snowfall is large, the high-speed is closed, and the transportation is limited, resulting in the poor arrival of goods in the Northeast, and the shipment of some local sources is acceptable. After the end of the short-term snowfall, the supply of goods from the Northeast has flowed out, and logistics prices have fallen, impacting other markets.

In terms of start-ups: short-term coal-based ethanol start-ups have increased, and fuel ethanol shipments are limited due to low downstream demand. The fuel ethanol market is unlikely to improve significantly. The enthusiasm of enterprises to produce edible ethanol is greater than that of fuel ethanol, and the edible output has increased, although cassava ethanol has declined due to the impact of high production costs, but corn ethanol in Northeast China has maintained normal production, and the supply is sufficient, and individual large factories in Henan have short-term plans to resume production. With the frequent snowfall in Northeast China and the rising freight rate, there is a possibility of adjusting the ex-factory price in the later stage of enterprise concession logistics.