A sustained drop in US ethanol prices has raised prospects of arbitrage opportunities to Asia, traders of the biofuel said Wednesday.
Spot ethanol barges in Chicago have slumped to an eight-month low, closing at 239.25 cents/gallon FOB Chicago Tuesday, Platts data showed. Chicago ethanol has been falling since November 17, when it was assessed at 310 cents/gal, with market participants blaming thin activity.
US CBOT February ethanol futures closed at 214.4 cents/gallon Tuesday.
Taking into consideration a freight rate of $75/cu m for a 10,000 mt cargo, plus a premium for logistics of 32-33 cents/gallon, US ethanol could arrive into the Philippines at $725-730/cu m CIF.
In Asia, anhydrous undenatured ethanol cargoes arriving in the Philippines on a CIF delivery basis were assessed Tuesday at $801/cu m for H2 Jan delivery, with $793/cu m for H1 Feb delivery and $788/cu m for H2 Feb delivery.
Incremental supply has been coming from Thailand and Vietnam, where offers were heard hovering at $730-750/cu m FOB Thailand, and reaching Subic Bay at $780-800/cu m CIF Philippines.
"It's a new crop season in Thailand, there's so much molasses but there's no buyers in the Philippines," according to a trader.
"Ultimately, it depends if the delivered US prices are more competitive than Thai material," another trader said.
"With the end of the US blender's credit and the European objection to E90 imports from US, the possibility of an arbitrage from US is there," said the second trader.
