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Asia Ethanol

Ulsan focus on USD/Real as weaker US ticket prices dent Brazil’s northward arbitrage

Eyes in the Korea B grade ethanol market remained fixed on the next move in the Real/USD spread and its implications for replacement economics on Thursday, with Ulsan spot bid/offer spreads maintaining a wide $20/m³ range between $470/m³ and $490/m³.

The Real remains at its lowest in over a decade, with Brazilian ethanol exports already up sharply in 2015 YtD after exporters turned in a dismal performance in 2014. Even so, Brazilian export discussions have quietened this week after a busy week of sales last week into the US, India and China. Softer US prices for California LCFS tickets and tighter D5 RIN spreads to D6 corn ethanol RINs have since hampered economics for Brazil fuel grade ethanol to ship northwards, and Wednesday’s DOE dataset spotlighting waning US gasoline consumption at the tail end of the driving season will offer little help.

Forward prices fob Brazil for B grade material remain in shallow contango through Q4, with a $5/m³ carry added to each month forward from October value pegged at $410/m³.


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