European October, Q4 ethanol prices firm on limited supply

15 October 2010 23:59  [Source: ICIS news]

LONDON (ICIS)--European ethanol prices moved up in October and in the fourth quarter for all grades, driven by higher agricultural feedstock costs, short supply and robust demand, market players said on Friday.

A lack of imports, recent synthetic production constraints and feedstock shortages, linked to poor global harvests, kept supply reduced, sources said.

Increasing competition for ethanol between traditional and fuel outlets was putting further strain on supply, as was the good-to-improving demand, depending on the sector. Consumption for screenwash players was also gaining momentum in line with seasonal requirements which was exerting additional pressure on ethanol supply.

“Due to poor harvests, inventories are quite low. Offer is not that good and demand is at a good level,” said one customer.

“Instead of [customers] fighting to get the best price, it is now a fight to get the product," one supplier added.

“Demand is outweighing supply, customers are asking for more and more and we cannot accommodate this. Less offers [in the market] is the main issue,” one fermented ethanol manufacturer said.

Both buyers and sellers agreed that prices had firmed, although there was some variation in actual numbers reported, depending on source, location and volume size.

In the industrial 99% market, prices for the fourth quarter were assessed up by €1-2/hlt (hectolitre) ($1-3/hlt) taking values in France to €69-72/hlt FD (free delivered). In Germany and Italy, the range was pegged slightly firmer at the upper end of the range, taking values to €69-73/hlt FD and €69-74/hlt FD respectively, according to ICIS. This was due to less domestic production and higher freight costs compared to France.  

A few large customers had heard numbers down to €63-67/hlt FD for industrial 99% in the fourth quarter, but these were considered exceptions rather than the norm.

Some sellers pegged prices at a minimum of €70/hlt FD for industrial 99%, even for larger volume accounts; with values reported up to €75-76/hlt FD. However, there was insufficient market confirmation to substantiate these higher values.

In the UK, industrial 99% prices were also frequently reported firmer between £770-830/tonne (€875-943/tonne) FD and the range was changed accordingly. This represented an increase of £10-20/tonne from the previous month/quarter.

Some sellers pegged prices in the UK above £800/tonne FD, reporting numbers up to £850-880/tonne FD, although the latter was not widely confirmed. By contrast, numbers in the low £700s/tonne FD were reported by a few large consumers, but these were strongly contested by other players amid short supply.

For industrial 96% rectified extra neutral (REN), prices had moved up to the mid-to-upper €60s/hlt FD, resulting from the dearth of imports. Numbers up to €70/hlt FD were also heard from one seller. Prices below the range were also heard in a few cases but were not widely confirmed.

Untraditionally, 96% Industrial REN and standard 96% beverage prices, based on molasses feedstock, were now on a par in the fourth quarter, as standard 96% beverage had edged up by €1-2/hlt, taking values to €63-66/hlt FD in France and €64-66/hlt FD in Germany and Italy respectively, according to ICIS.

In the UK, standard 96% beverage prices, based on molasses feedstock, were largely heard either side of £60/hlt FD.

Grain based 96% beverage ethanol prices had been pushed up even higher than its molasses beverage counterpart, driven by short supply and rocketing costs for grain.

Numbers were mainly reported in the mid €70s/hlt FD in mainland Europe, with business also heard up to €77-80/hlt FD. In the UK, numbers were frequently heard in the low-to-mid £60s/hlt FD, although prices up to £70/hlt FD were also reported by one manufacturer.

($1= €0.71, €1=£0.88)

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By: Heidi Finch
+44 20 8652 3214

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