Process Iteration and Demand Differentiation: Review of China's Ethanol Market in H1 2026 and Future Outlook

As a leading global producer and consumer of ethanol, China accounted for 35%–40% of world ethanol capacity in 2025 and achieved a domestic self-sufficiency rate as high as 99%, building a diversified industrial system in which bio-fermentation and coal-based processes operate in parallel. In the first half of 2026, China’s effective ethanol capacity reached 18.13 million tonnes, with total output of 5.3936 million tonnes and a capacity utilization rate of 59.5%. Overall, the market was characterized by relatively ample supply and structural divergence in consumption. Leveraging its cost advantage, coal-based ethanol continued to expand capacity, profoundly reshaping the industry’s competitive landscape.

Ethanol Output by Category, H1 2026 (10,000 tonnes)

In terms of supply structure, China’s ethanol output consists of three segments: edible ethanol, fuel ethanol, and coal-based ethanol, accounting for 48%, 31%, and 21%, respectively. Bio-fermentation ethanol remains the market mainstay. Corn is the dominant feedstock, representing 88% of total fermentation-based output, while cassava and molasses play a minor supplementary role. Plant maintenance was intensive in the first half of the year, involving a cumulative capacity of 8.74 million tonnes. From May to June, multiple fermentation units in Northeast China were shut down for maintenance at the same time, directly reducing fermentation-based ethanol output. In contrast, several new coal-based ethanol plants were commissioned and became the largest source of incremental supply in H1 2026. Owing to a mismatch between output and demand, the industry recorded a supply surplus of 200,000 tonnes in H1. Inventory pressure was concentrated in fuel ethanol, whereas edible ethanol inventories stayed at low levels. In terms of price, the average domestic market price of edible ethanol in H1 2026 was RMB 5,485.96/tonne, up 6.65% year on year, with spot prices broadly rising across regions.

Bio-Fermentation Ethanol Output by Feedstock, H1 2026 (10,000 tonnes)

Downstream consumption markets showed a clear divergence in performance. Traditional demand sectors weakened overall. The baijiu industry remained in a destocking cycle, with sluggish end-user consumption. Meanwhile, the rising penetration of new energy vehicles shrank total gasoline consumption, directly dragging down demand for ethanol-blended gasoline. The chemical downstream sector became the key bright spot: geopolitical factors boosted overseas orders, pushing up operating rates of downstream chemical products such as ethyl acetate, and driving steady growth in ethanol demand for chemical use. Foreign trade also performed strongly. Exports of undenatured ethanol increased significantly, with fuel ethanol exports to Vietnam achieving a breakthrough from zero to real shipments, effectively cushioning weak domestic demand. Imports remained at a low level, causing limited impact on the domestic market.

Looking ahead to H2 2026, supply pressure in the ethanol industry will persist. Planned new coal-based ethanol capacity in the second half totals 1.37 million tonnes, but most commissioning schedules fall in Q4, leaving uncertainty over the actual pace of capacity release. Meanwhile, plant maintenance will continue, involving an estimated total capacity of 4.57 million tonnes; shutdowns are scheduled for both fermentation and coal-based production units. Overall, H2 2026 ethanol output is forecast at 5 million tonnes, down 7% half-on-half, and the capacity utilization rate is expected to fall to 55%.

By process, fermentation ethanol operating rates will decline in Q3 amid concentrated maintenance. In Q4, with new corn entering the market in bulk, feedstock cost pressure will ease, and operating rates at fermentation plants in Northeast China are expected to recover. Cassava ethanol may see a moderate operating-rate improvement as the cassava harvesting season arrives in Southeast Asia, while molasses ethanol will only gain opportunities to recover after the crushing season begins.

On the demand side, traditional downstream sectors such as baijiu and ethanol-blended gasoline are unlikely to show notable recovery. Chemical demand will rely heavily on the sustainability of overseas orders, and exports will remain the key variable for market balance. As for prices, quotations are expected to fluctuate with feedstock costs and maintenance schedules. The mainstream spot price range in Northeast China is expected at RMB 5,000–5,400/tonne; East China spot prices will be in the RMB 5,450–5,800/tonne range; and coal-based ethanol prices are expected to remain at RMB 5,200–5,400/tonne. Overall, the ethanol industry landscape is being reshaped at an accelerating pace. Coal-based ethanol is steadily gaining market influence, and competition is increasingly shifting toward cost leadership. The market will continue to see pressure on traditional demand, while chemicals and exports contribute incremental growth.

Incremental ethanol supply in H2 2026 is expected to come mainly from coal-based ethanol. New capacity will be commissioned in both Q3 and Q4, and catalyst replacement is also planned in both quarters, with some plants scheduling shutdowns. For fermentation ethanol, operating rates in Northeast China will decline in the July–August maintenance season in Q3. After maintenance ends and new corn comes onto the market, cost pressure will ease, small plants will resume production, and overall operating rates will rise in Q4. For cassava ethanol, operating rates are currently low; late in Q4, as the cassava harvest season begins in Thailand and Vietnam and costs decline, domestic cassava ethanol plants may see a slight operating-rate uptick. Molasses ethanol is unlikely to restart in Q3, but in Q4, with the arrival of the crushing season, molasses ethanol plants may increase operating rates.