09 May 2006 18:14 [Source: ICIS news]
HOUSTON (ICIS news)--Transportation and other derivative markets offer the best opportunity for investors to capitalise on the fast-growing ethanol industry, JPMorgan analysts said on Tuesday.
“Investment in the ethanol complex anywhere in the world is fundamentally a play on government regulation,” said JPMorgan analysts. “Without subsidies to lower its cost and mandates to require its use, the economic viability of ethanol in the ?xml:namespace>
Most ethanol is produced by farm cooperatives and private ventures, which further complicates investments. Only two publicly traded companies, Archer Daniels Midland and Pacific Ethanol, have significant ethanol production.
Transportation firms, however, specifically rail and barge, stand to gain from the growth of the ethanol market, said JPMorgan.
The analysts rated Hornbeck Offshore Services, a major shipping firm, overweight, meaning it will outperform the average total return of stocks of similar companies.
“We believe that Hornbeck Offshore Services’ tug and tank barge fleet will benefit from the expected shortfall of ethanol product to the US Northeast as the fleet is critical to the supply of petroleum products in one of the
Two rail companies, CSX Corporation and
“Growth in ethanol consumption should provide a source of incremental revenue for all four
Also getting an overweight rating from JPMorgan was Marathon Oil, which has long had the practice of blending significant amounts of ethanol in its gasoline.
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