China corn futures rallied on Thursday after the central government said it would promote the use of ethanol in vehicles, its first public statement on its ambitious biofuel policy in almost a year. China will promote the use of ethanol in 15 regions this year, including the Beijing and Tianjin municipalities and Hebei province, according to a post on the government's official website that summarised a Wednesday meeting of the nation's State Council.
The most-active corn futures on the Dalian Commodity Exchange settled at 1,889 yuan ($274.80), up 0.7 percent from a day earlier. Prices earlier rose as much as 1.3 percent to an intraday high of 1,900 yuan. The gains also followed customs data released on Thursday showing a big drop in corn imports in July after Beijing imposed hefty tariffs on shipments from the United States as part of its trade conflict.
"Capital piled into corn futures betting on increasing demand. The comments are bullish news for ethanol and corn, even if they are still a bit vague," said Meng Jinhui, analyst with Shengda Futures. Beijing will lay out plans for grain-based ethanol production and accelerate the construction of cassava-based ethanol plants, the government posting said.
No further details were given. The statement comes after the government announced in September a plan to blend ethanol into fuel nationwide by 2020 to digest the nation's vast corn stockpiles. The statement has allayed concerns in the industry that the ethanol policy had stalled, and shares in China's ethanol producers rallied as the news restored confidence among investors.
State-controlled producers, like China's State Development & Investment Corp (SDIC), agribusiness COFCO and Jilin Fuel, have rushed to draw up plans to invest billions of yuan to double output in the world's largest car market. But only one major project has received a greenlight to start construction on an ethanol plant.
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