The US ethanol industry will turn the spotlight directly onto international sales opportunities at its centrepiece annual RFA conference in New Orleans next week. With the overt backing of the US Department of Commerce, the conference has set aside five hours of its otherwise domestically focused airtime specifically to marry international buyers with US sellers. Brazil, India, China, the Philippines and Mexico are pegged as the main upcoming export opportunities for US ethanol as the industry looks to better its 2015 export performance. Last year’s overseas sales came in a dead heat with 2014 sales, which were themselves only the second highest on record since 2011 despite booming US output. The tail off in US excitement over an explosion in Q3 2015 Chinese ethanol buying indicates the pitfalls for US sellers in competing for market share into foreign fuel ethanol support programmes backed by often opaque domestic agricultural feedstock supply chains and cloudy import approval procedures. Even so the US industry remains optimistic about its potential as the cheapest swing supplier of ethanol as overseas markets continue to expand their domestic renewable fuel mandates to meet cleaner air and fuel diversification ambitions.
The large number of vessels still lined-up to leave the US for Asian buyers meanwhile largely reflects business booked up to seven months ago. Availability of vessels to carry spot ethanol for export is tight despite record US tank storage inventories. The ongoing slump in mineral oil prices has stoked international demand for cheap MTBE, restricting the availability of tonnage to ship rival ethanol and leading to reports of ethanol loading delays in US ports such as Houston. Most suitable shipping capacity is already reported pre-booked for February and March. Demand fragmentation to accommodate the specific quality parameters demanded by different overseas buyers further reduces the ability of US exporters to take advantage of shipping economies of scale.
Two shipments of US ethanol were moved from the US to the Philippines in January, totalling a combined volume of around 39,000m3, and up to six new shipments are reported to be en route to the same destination in the coming weeks. But a lack of fresh fixtures to the Philippines shows the limitations of reduced price alone as an agent for stimulating overseas demand for US product given the complexities of concluding deals into Asian markets in particular. While they remain hopeful of fresh spot sales into China’s growing provincial renewable fuel mandates when buyers return after Chinese New Year, US sellers remain wary of a repeat of the opaque shifts in government-controlled domestic supply dynamics which soured the short-lived boom in trade in the third quarter of last year. Indian offtake meanwhile continues to disappoint US sellers given the lack of enforcement of higher headline mandates and tough competition from cheaply priced MTBE.