NEW YORK (Reuters) – Three ships carrying ethanol were heading to China from the U.S. Gulf coast, three commercial sources told Reuters on Monday, in a sign that U.S. fuel exports to the country were rising sharply. .
Shipments may exceed the total amount of US ethanol that China imported last year, a positive development for the US ethanol industry, which has seen a decline in demand due to the coronavirus pandemic and the US-China trade war. .
Each of the ships has a capacity of around 30,000 tons, or about 240,000 barrels of ethanol, the sources said, although the exact amount of renewable fuel on board was not immediately clear.
CHART: US Ethanol Exports to China vs. Rest of the World –
It was also unclear when the shipments would arrive in China, which buys US ethanol as fuel to mix with gasoline. A source said that at least two of the tanker trucks left in late February.
All three shipments should be among previously booked vessels, with more expected to be shipped to China in the coming months, three Asia-based traders said.
In January, Archer Daniels Midland Co CFO Ray Young said China had purchased “approximately 200 million gallons” (4.76 million barrels) of US ethanol by the first half of 2021.
That would equate to about 15-20 ships of renewable fuel, the traders said, mostly booked last year when US ethanol prices hit their lowest point.
COFCO and Sinopec were among the buyers of the US shipments, the traders said.
Two shipments booked by COFCO already arrived in China recently, while Sinopec is shipping imported ethanol to domestic markets, said a China-based source familiar with the ethanol trade.
GRAPH: US Gasoline and Ethanol Prices –
“Domestic cereal prices continue to rise, which has raised domestic ethanol prices and created a large profit margin for ethanol imports,” said the source, who did not want to be identified because she was not authorized to speak to the media.
COFCO and Sinopec did not immediately respond to faxes seeking comment.
While China imported an annual record 4.72 million barrels of US ethanol in 2016, it has not been a major importer recently. However, reduced supplies of domestic corn used to make biofuel, coupled with comparatively cheaper prices from the United States, have stimulated the need for imports.
“Domestic corn is too expensive,” said a China-based trader with an international trading house, making imports profitable.
US ethanol to China on a CIF basis is currently trading 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 filled to capacity, the loads would equal about 720,000 barrels of ethanol, more than the 506,000 barrels of US ethanol shipped to China in all of 2020.
The surge in exports comes as the US ethanol industry tries to return to more normal levels of production following the destruction of demand by the pandemic. Ethanol production has risen to 849,000 barrels a day in the week through February 26, from a record low of 537,000 bpd last April, EIA data showed.
The United States and China signed a trade agreement in January 2020, in which China pledged to buy more American agricultural, energy and manufactured products.
Reporting by Stephanie Kelly in New York and Hallie Gu in Beijing; Editing by Marguerita Choy and Jacqueline Wong