Three ships carrying ethanol are sailing from the U.S. Gulf of Mexico to China, with more ethanol to be shipped in the future, multiple trade sources have revealed, indicating a sharp increase in Beijing‘s fuel imports from the United States.
Reuters reported on March 9 that three traders based in Asia told the agency that the three shipments would be among those booked earlier and it was unclear when they would arrive in China, with one source saying at least two tankers left in late February and more are expected to arrive in China in the coming months. China uses ethanol mixed with gasoline as fuel.
Each ship has a capacity of about 30,000 tons, or about 240,000 barrels of ethanol, the source said, although it is not clear exactly how much ethanol is being carried on board. If the three tankers are assumed to be fully loaded with ethanol, the cargoes would equal about 720,000 barrels, more than the 506,000 barrels of ethanol shipped from the U.S. to China in all of 2020.
The ethanol was ordered mainly when U.S. ethanol prices fell to their lowest point last year, and Chinese companies – COFCO and Sinopec Group – were among the buyers, according to traders. A source familiar with the ethanol trade said two shipments ordered by COFCO have arrived in China, while Sinopec is shipping imported ethanol to the domestic market.
The source added that this is a positive sign for the U.S. ethanol industry. Under a trade agreement signed between the Chinese Communist Party and the Trump administration in January 2020, China committed to buy more U.S. agricultural products, energy and manufactured goods. Sales of U.S. ethanol later fell for a Time due to the New Coronavirus (NCCV) pandemic and the U.S.-China trade war.
In January, Ray Young, chief financial officer of global grain merchant Archer Daniels Midland Co (ADM), said China bought “about 200 million gallons” (4.76 million barrels) of U.S. ethanol in the first half of 2021. China had the highest annual record of 4.72 million barrels of U.S. ethanol imports in 2016.
Reuters analyzed that the import demand was spurred by tightening domestic supplies of corn for biofuel production on the Chinese side and relatively cheaper prices in the United States. According to the U.S. Energy Information Administration (EIA), U.S. ethanol production had increased to 849,000 barrels per day in the week ended Feb. 26 from a record low of 537,000 barrels per day in April last year.
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