Cheaper imports of E90 displace T1 fuel ethanol in Europe

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

LONDON (ICIS)--Europe's imports of 90% ethanol-blended gasoline (E90) from the US have displaced T1 fuel ethanol and capped T2 prices, market sources said on Wednesday.

Players in the European fuel-ethanol market said that E90 had become attractive in the import market because it was subject to a lower import duty, as it is classified as a gasoline component instead of ethanol.

Physical trades of T1 fuel ethanol were practically non-existent as buyers opted for the cheaper E90, according to market sources.

The current price levels have closed the arbitrage for T1 from the US and South America, which has resulted in the lack of buying activity.

According to sources, E90 was trading on Wednesday at $660/tonne (€482/tonne) FOB (free on board) Rotterdam. Prices of T1 material, however, were notionally placed at levels of $690-710/tonne FOB Rotterdam, unchanged from the previous week.

The reinstatement of a US ethanol-blending subsidy for the remainder of 2011 meant that the effect of the current displacement could remain for a year.

However, as the subsidy has been unpopular in the US Congress, some said the displacement could end earlier.

Elsewhere, E90’s low price levels also exerted their influence on prices of T2 fuel ethanol. Despite rising wheat and corn prices, T2 numbers had only edged slightly higher on Wednesday, trading at €610-620/tonne FOB Rotterdam, up $5/tonne.

One trader said that T2 material was now trading below production economics and that this could lead to reduced output.

Other sources said that while T2 prices were currently subdued, values were expected to increased values when Germany fully implements 10% ethanol-blended (E10) fuel.

($1 = €0.73)

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By: Sarah Trinder
+44 20 8652 3214

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