Sentiment in the Asian grade B ethanol market was mixed Monday after the Brazilian Real plummeted late last week, sources said.
The US dollar/real exchange rate hit a five-month low of 3.37 at 0830 GMT Friday after Brazilian president Michel Temer was implicated in a widening corruption scandal.
"Theoretically, prices should fall by $40-$50/cu m considering the drop in currency," one Asian trader source said last Friday.
However, more clarity was needed as there were still some bullish factors that needed to be factored into the equation, a Japanese trader said Monday.
New rules for Brazilian importers and the weaker Real would lower ethanol imports from the US, which could lend some support to Brazilian domestic ethanol prices, the source added.
"The market did not change much actually," said another Asian ethanol trader Monday, adding buyers would rather delay buying and wait for more clarity as the movement was driven by politics rather than fundamentals.
"Brazilian producers wanted to sell at that time, but the thing is, who are the buyers? No one has given a firm bid or offer yet," the source said.
Price indications have been all over the place since the plunge in the Real, with some selling indications heard at $490/cu m FOB Santos for July-August shipment, while other market sources estimated the tradable level at $500-$505/cu m FOB Santos.
On the buying side, one Asian buyer said he really had no idea of the current price level, but would consider buying at around $550/cu m for August delivery.
A total of 40,000-43,000 cu m of grade B ethanol was heard loading in May from Brazil bound for to Northeast Asia, according to market sources. This should cover much of the demand from Japanese and South Korean buyers for third quarter deliveries, the sources said.
