Europe fuel ethanol domestic prices close to record highs

14 February 2011 12:35  [Source: ICIS news]

LONDON (ICIS)--Domestic prices for European fuel ethanol are close to breaching recent record highs due to an increase in the cost of wheat, its main feedstock, sources said on Monday.

Domestic fuel ethanol - also known as T2 fuel ethanol - reached a peak in September 2010 when it was trading at €655/cbm ($885/cbm) FOB (free on board) Rotterdam, according to ICIS data.

Prices for uncertified T2 fuel ethanol, product that does not meet renewable energy directive (RED) criteria in some countries, were on Monday quoted at €640-650/cbm.

Some sources had previously said that producers needed to sell T2 material at prices above €700/cbm to make decent margins, leading some to reduce production.

It was believed that RED certified material was trading much higher.

Certified T2 fuel ethanol was in scarce supply, meaning countries which had transposed the RED into their internal legislation, like Germany and Austria, were paying a premium of €30-40/cbm.

One source said it had traded RED certified material in the German market for €675/cbm FOB Rotterdam and said it had seen prices of €700/cbm offered for railcar material.

To compound the situation, Germany’s implementation of E10 (10% ethanol blended gasoline) had almost doubled the country’s fuel ethanol consumption, according to some, and was putting further pressure on supply.

Fuel ethanol was not the only product seeing rising values as feedstock wheat was trading at €275/tonne, the highest levels in two years, putting pressure on production margins.

Some believed wheat prices would continue to rise due to bad weather and poor harvests.

($1 = €0.74)

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By: Sarah Trinder
+44 20 8652 3214

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