Chinese buyers of US ethanol will cut their imports because China charges punitive tariffs in response to the US trade war. However, China may soon have to turn back to foreign suppliers if they want to meet their goal of adding ethanol to gasoline.
China increased import tariffs of 15% on ethanol imports from the US with immediate effect on Sunday. Previously it was 30%, now it's 45%.
This neutralises the advantages for importers compared to the national offer. Ethanol is alcohol, which is usually made from corn or sugar to mix with the gasoline. It wants to reduce CO2 emissions.
This is good news for local ethanol producers, as there are huge stocks of corn in government stocks in China.
But if China wants to meet its targets of 10% blending in all petrol offerings across the country by 2020, it will soon need to import ethanol again. This is what Chinese market analysts expect this morning. The demand will explode by 2019 at the latest.
At present China produces 2.5 million tons of ethanol per year.The import tariffs of 30% since the beginning of 2017 have already led to a strong increase in production. After the prices for US ethanol dropped, imports from the US rose again.
But now there is a pain threshold for importers and imports can no longer compete with national production. The orders are just until May, then there will be no further imports from the US for the time being.
Refinery managers today said that Brazil, currently the world's largest ethanol producer, is too expensive to deliver to China. But it could be an option if the trade dispute between the US and China expands.
Text: HANSA Futures Trading GmbH / / Graphic: Reuters
China increased import tariffs of 15% on ethanol imports from the US with immediate effect on Sunday. Previously it was 30%, now it's 45%.
This neutralises the advantages for importers compared to the national offer. Ethanol is alcohol, which is usually made from corn or sugar to mix with the gasoline. It wants to reduce CO2 emissions.
This is good news for local ethanol producers, as there are huge stocks of corn in government stocks in China.
But if China wants to meet its targets of 10% blending in all petrol offerings across the country by 2020, it will soon need to import ethanol again. This is what Chinese market analysts expect this morning. The demand will explode by 2019 at the latest.
At present China produces 2.5 million tons of ethanol per year.The import tariffs of 30% since the beginning of 2017 have already led to a strong increase in production. After the prices for US ethanol dropped, imports from the US rose again.
But now there is a pain threshold for importers and imports can no longer compete with national production. The orders are just until May, then there will be no further imports from the US for the time being.
Refinery managers today said that Brazil, currently the world's largest ethanol producer, is too expensive to deliver to China. But it could be an option if the trade dispute between the US and China expands.
Text: HANSA Futures Trading GmbH / / Graphic: Reuters
