U.S. Ethanol Prices React to Early July Market Volatility and Vietnam Policy Shifts

Houston (USA): Entering July 2024, U.S. Ethanol prices showed volatility, influenced by market dynamics and broader economic factors. The Ethanol market started the month on an upward trend but experienced a downturn in the following days. Specifically, U.S. Ethanol prices ended the previous week with a 1.5% increase but lost those gains early this week. Similarly, FOB Houston prices, which had risen 5.2% last week, dropped 0.8% to 58.21 cents/liter (220.34 cents/gallon).

Meanwhile, several key developments have been happening the Ethanol market. LanzaJet, a prominent sustainable fuels technology company, announced a significant investment from MUFG, one of the world’s leading financial groups. This investment, which is a segment of LanzaJet's USD 100 million equity funding round, is designed to boost the company's ability to expand its unique Ethanol-to-sustainable aviation fuel (SAF) technology. MUFG’s support underscores the strategic importance of sustainable fuels in decarbonizing aviation and fostering global economic and environmental sustainability.

In a separate development, the U.S. Grains Council, in partnership with Iowa Corn, hosted Vietnamese officials and industry professionals on a tour of the U.S. Ethanol value chain. This initiative aims to support Vietnam’s growing demand, particularly as the country considers transitioning to E5 RON92 mandates and exploring E10 blending. This potential transition could greatly increase U.S. Ethanol exports, supporting Vietnam's objectives for clean energy.

Production data from the Energy Information Administration (EIA) shows robust output in the U.S. Ethanol production averaged over 1 million barrels per day (bpd) in the week ending June 28, reflecting a 21,000 bpd increase from the previous week and a slight rise compared to the same week last year. Midwest production also saw an uptick, averaging 1.008 million bpd, 0.9% higher than the same period last year. Ethanol blending activity averaged 925,000 bpd, slightly down week-on-week but 0.2% higher than the same week last year. At the same time, domestic Ethanol inventories rose, marking a 5.7% increase from the previous year.

July typically marks the peak of the U.S. summer driving season, driving up gasoline demand and, consequently, Ethanol blending requirements mandated by the Renewable Fuel Standard. This seasonal demand surge is expected to support product’s prices. However, several factors could influence price trends. Corn price fluctuations, a critical factor in Ethanol production costs, could lead to higher prices if corn prices rise. Conversely, lower industrial demand and high producer inventories might exert downward pressure on prices. Technological advances in Ethanol production and surplus feedstocks could also contribute to lower production costs and prices over time.

In conclusion, the U.S. market has shown mixed performance in early July, influenced by both market and seasonal factors. Looking ahead, Ethanol prices are likely to experience volatility due to fluctuating corn prices, seasonal demand patterns, and advancements in production technologies. While the peak summer driving season is expected to support demand, ongoing developments in the Ethanol industry, including strategic investments and international collaborations, will play a crucial role in shaping the market dynamics through July and August.