Pre-holiday demand release releases ethanol price weakness

As the Spring Festival approaches, demand for liquor and related products is gradually increasing. This has prompted liquor companies to stock up on raw materials in anticipation of the holiday season. However, ethanol consumption remains sluggish, with no signs of a significant rebound. Currently, most ethanol producers are not planning to halt operations during the holiday, which means that inventory levels will continue to rise throughout the festival period. Despite this, there is strong initiative among ethanol companies to manage their production and sales. The recent weak price trend in ethanol has been influenced by lower demand from downstream industries, especially in the northeast region, where corn-based ethanol production is concentrated. With high supply levels during peak seasons and weakening downstream demand, ethanol prices in the area have remained under pressure. Looking ahead, ethanol supply is expected to remain abundant, keeping prices weak. In addition, as the purchase activities of liquor companies wind down, ethanol sales across the country have slowed significantly. This has led to rising inventories of molasses and cassava-based ethanol in southern regions, making it difficult to sell and further pushing prices down. As a result, competition in the ethanol market is intensifying. Although the recent decline in raw material prices has eased some cost pressures for ethanol producers, the limited impact of rising by-product prices—especially DDGS—has reduced the overall cost offset effect. The domestic DDGS market has remained relatively stable, but the price gap between soybean meal and DDGS has narrowed, diminishing the competitive advantage of DDGS. Additionally, high import prices and tight supply conditions are keeping spot prices of DDGS steady in the short term. In terms of corn prices, the northeastern production areas have seen a downward trend since last week. Corn processing companies in Heilongjiang and Jilin have lowered their purchase prices for plant corn, with Heilongjiang experiencing particularly sharp declines. Slow sales and an oversupply of corn in the coming months have also led to increased concerns about grain quality and moisture content, causing some corn futures to rise in certain parts of the northeast. Meanwhile, enterprise purchasing enthusiasm has weakened due to the current warehouse environment. Taking all these factors into account, the continued decline in downstream demand, combined with normal ethanol production operations, will lead to a growing supply of ethanol and increased sales pressure. Consequently, ethanol prices are likely to remain weak in the near future. Although many ethanol companies are still trying to secure final raw materials for pre-holiday orders, the overall market is expected to remain cautious post-holiday, and ethanol prices are unlikely to see a significant improvement.

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