Buying interest for imported ethanol has lost momentum in China in recent weeks, after a pre-Lunar New Year buying binge and as a weakening yuan combined with falling domestic prices have closed the arbitrage into the Asian powerhouse, sources said.
The impact has been felt across the board, with sources reporting dwindling demand for both imports of fuel-grade and industrial-grade ethanol.
For fuel-grade ethanol, offers at around $580/mt were now considered to be "expensive", according to a Chinese trader, despite cargoes being heard to transact at similar levels previously.
Meanwhile, Pakistani producers of industrial-grade ethanol said they have not been receiving inquiries from Chinese producers of late.
Prices of domestically produced cargoes have eased, as feedstock costs have slumped significantly.
With both corn and cassava, the chief sources for ethanol production in China more affordable, ex-factory prices of hydrous ethanol have dipped well below Yuan 5,000/mt, or more than 10% lower compared with three months ago.
Meanwhile, a weakening Chinese currency has also been blamed for eroding the competitiveness of imports. The yuan was trading at 6.5118 to the dollar at the close of the local market Monday, compared with around 6.10 to the dollar during the third quarter last year.
A month ago, Chinese customers were on an importing spree, buoyed by news that import duties would be unchanged. Fuel-grade ethanol is subject to a 5% tariff, while industrial-grade ethanol from free trade partners is exempt.
Buying appeared to have peaked in January when US ethanol prices hit multi-year lows.
At least 100,000 cu m of fuel-grade ethanol loading from the US in January were destined for China, according to trade and shipping sources, while oil major Sinopec was said to have bought a further 30,000 cu m for February loading.
Total imports into China last year were a record 686,908 cu m, according to Chinese custom statistics.
