UPDATE 2-China bought about 200 mln gallons of U.S. ethanol for H1 2021 -ADM – Successful Farming

(Adds comments, details, background)

By Karl Plume and Hallie Gu

CHICAGO/BEIJING, Jan 27 (Reuters) – China has bought “roughly 200 million gallons” of U.S. ethanol for the first half
of 2021, matching its previous record for annual imports of the
corn-based biofuel, Archer Daniels Midland Co Chief
Financial Officer Ray Young said on Tuesday.

The accelerated imports are among several positive signs for
the ethanol sector which has been hard hit by years of
oversupply and, more recently, a sharp drop in demand as the
coronavirus pandemic slashed fuel use.

Imports of 200 million gallons would eclipse China’s
previous annual record of 198.1 million gallons in 2016,
according to U.S. Census Bureau trade data.

“China actually has been buying U.S. ethanol. That’s
something that they have not been doing over the past couple of
years,” Young said on an earnings-day call with analysts.

“We do see, particularly in the area of ethanol, green
shoots of recovery in 2021 for this business here,” he said
after the company reported a stronger-than-expected
fourth-quarter profit on Tuesday.

China has not traditionally been a large importer of
ethanol, but tightening supplies of domestic corn used to make
the biofuel coupled with a wide spread versus U.S. prices
spurred the need for imports.

“Domestic corn prices keep rising and ethanol prices in the
(domestic) market remain high,” said a Chinese source with
knowledge of the purchases, adding that some cargoes have
arrived this month.

Chinese demand for ethanol has also increased since it can
be used as an alcohol in disinfectants, whose consumption has
surged amid the coronavirus pandemic.

“The supply gap is quite big also due to the epidemic, and
can only be supplemented with imports,” the source said.

China mainly produces ethanol from corn and it is used to
make alcoholic spirits, disinfectant alcohol, and fuel ethanol.

China’s corn prices rallied over 30% in 2020 and have
climbed further to a record this year.

ADM did not disclose if it was among China’s suppliers.

Valero Energy Corp is one of the companies that has
sold ethanol cargoes to China, two U.S. market participants
said. Valero did not immediately respond to a request for
comment.

Sinopec and COFCO were among the buyers of U.S.
ethanol cargoes, according to the Chinese source.

Both Sinopec and COFCO did not immediately reply to faxes
seeking comments.

Even as China increases its purchases, about 10% to 15% of
U.S. ethanol production capacity remains idled due to poor
margins, including two dry corn mills owned by ADM. Those two
mills, Young said, could restart in the first half of this year
if margins improve.

Beijing suspended a nationwide rollout of ethanol in
gasoline supplies in 2020 following a sharp decline in corn
stocks.

However, on Dec. 31, China’s energy regulator urged oil and
gas companies to restore supplies of ethanol-blended gasoline
following reports that firms had cut sales in parts of the
country.

(Reporting by Karl Plume in Chicago, Hallie Gu in Beijing;
Additional reporting by Mark Weinraub in Chicago and Stephanie
Kelly in New York; Editing by Marguerita Choy)

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