Three ships carrying ethanol were heading to China from the US Gulf Coast, three trade sources told Reuters on Monday, in a sign that exports of the fuel were sharply increasing from the US to the country.

The shipments may surpass the total amount of US ethanol that China imported last year, a positive development for the US ethanol industry, which has seen decreased demand because of the coronavirus pandemic and the US-China trade war.

The ships each have a capacity of around 30,000 tonnes, or about 2,40,000 barrels of ethanol, the sources said, though the exact amount of the renewable fuel onboard was not immediately clear.

It was also unclear when the cargoes would arrive in China, which buys US ethanol for fuel to blend with gasoline. One source said at least two of the tankers left at the end of February.

The three cargoes should be among vessels booked earlier, and more were expected to get shipped to China in the coming months, three Asia-based traders said.

In January, Archer Daniels Midland Chief Financial Officer Ray Young said that China had bought “roughly200 million gallons” (4.76 million barrels) of US ethanol for the first half of 2021.

That would be equivalent to around 15-20 vessels of the renewable fuel, the traders said, mainly booked last year, when US ethanol prices hit their lowest point.

COFCO and Sinopec were among buyers of the US cargoes, traders had said.

Two cargoes booked by COFCO already arrived in Chin arecently while Sinopec is shipping imported ethanol to the domestic markets, said one China-based source familiar with the ethanol trade.

“Domestic grain prices keep rising, which has pushed up prices of domestic ethanol, and created great profit margin for importing ethanol,” said the source, who declined to be named as he was not authorised to speak to the media.

COFCO and Sinopec did not immediately respond to faxes seeking comment.

While China imported an annual record of 4.72 million barrels of US ethanol in 2016, it has not recently been a large importer. However, tightening supplies of domestic corn used to make the biofuel, coupled with comparatively cheaper US prices have spurred the need for imports.

“Domestic corn is too expensive,” said a China-based trader with an international trading house, making imports profitable.

US ethanol to China on a CIF basis is currently quoted at around $700 per tonne, while domestic ethanol in March is a bit over $1,000 per tonne, according to the trader.

If all three tankers were filled to capacity, the cargoes would be equivalent to around 7,20,000 barrels of ethanol, more than the 5,06,000 barrels of US ethanol shipped to China in the whole of 2020.

The increased exports come as the US ethanol industry tries to return to more normal levels of production following the demand destruction from the pandemic. Ethanol production has increased to 8,49,000 barrels per day in the week to February 26, from a record low of 5,37,000 bpd last April, EIA data showed.

The US and China signed a trade deal in January 2020, where China pledged to purchase more of American farm,energy and manufactured goods.

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