January, Q1 Europe ethanol rises on feedstocks, short supply

14 January 2011 23:59  [Source: ICIS news]

LONDON (ICIS)--European ethanol prices for January and the first quarter rose because of higher feedstock costs and tighter supply, market players said on Friday.

Poor crop harvests through much of the world have resulted in fewer shipments to Europe. A spate of synthetic production constraints and ongoing good demand were also contributing factors, limiting ethanol supply in Europe.

In addition, the new European Renewable Energy Directive (RED) mandates by 2020 an increase of at least 10% in renewable energy sources used in fuel.

Demand was healthy according to most, with sources pinpointing the recent strong pull into the downstream screenwash sector due to bad weather over the last month.

The market was expected to remain tight until at least the second part of 2011, based on the quality of the next harvests, the additional requirements for ethanol in the fuel sector, as well as a major forthcoming plant maintenance for one synthetic ethanol plant in the second quarter

“People are paying the high prices, we are getting the orders,” said one distributor, who attributed this to low stocks and high feedstock and energy costs.

Sellers said they were struggling to keep up with the fast pace of the feedstock increases and the resulting intensified competition with the food and fuel sectors.

“Sugar, grain and ethylene prices are very high, the feedstock prices are moving up faster than the ethanol levels. We are not covering all the feedstock increases,” said one ethanol manufacturer.

First-quarter prices rose €3-4/hectolitre (hl) for European 96% neutral beverage grade, based on molasses feedstock. The increase brought prices to €66-73/hl ($88-97/hl) FD (free delivered) for January and the first quarter, as assessed by ICIS.

In the UK, prices rose £1/hl ($1.58) from the fourth quarter to £59-64/hl FD.

Industrial 96% rectified neutral (REN) prices rose to similar levels for beverage-grade molasses-based ethanol, because of the lack of imports and exceptionally high screenwash demand.

European 99% industrial ethanol prices rose €1-3/hl, taking values to €72-78/hl FD.

In the UK, prices rose £40-50/tonne. The increases in the UK took prices to £820-880/tonne FD. Numbers on either side of the ranges were also heard in a few cases, but they were not widely confirmed.

($1= €0.75)
($1 = £0.63)

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By: Heidi Finch
+44 20 8652 3214

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