Unpopular E10 gasoline in Germany provides demand boost for MTBE

11 March 2011 15:22  [Source: ICIS news]

LONDON (ICIS)--The introduction of E10 gasoline in Germany has proven to be so unpopular with consumers that “super” fuel blends containing higher levels of ethers are seeing a boost in demand, sources said on Friday.

From the beginning of February in Germany, E10 gasoline (produced with up to 10% ethanol content) began to replace regular 95 RON (research octane number) gasoline, which contains a maximum of 5% ethanol. Those consumers unwilling to buy E10 have switched to purchasing the only other alternative – “super” 98 RON.

“[The blend 98 RON] used to be around 10% of demand [in Germany], now it’s up around 40%,” said a trader.

The higher octane number of 98 RON requires greater amounts of octane boosting ethers, such as methyl tertiary butyl ether (MTBE), which sources said has seen a noticeable increase in demand over the past two to three weeks.

The German public's lack of information about E10 from gasoline producers and the government was said to be responsible for the blend's poor reception in the country. An unclear understanding of the risks E10 poses to certain vehicles has resulted in widespread bad press for E10.

According to a report by Germany’s Spiegel Online, German politicians met on 8 March to discuss the public’s aversion to the introduction of E10 and said that they would work to better inform Germans about which cars can use the new fuel.

Ethanol poses a range of risks to vehicles, such as corrosion of aluminium, polymerisation of plastics and rubber, and a reduction of the lubricating properties of gasoline.

While most modern cars are thought to be able to operate safely with E10, there are doubts as to whether the tests have been rigorous enough, and few car owners are willing to risk damaging their vehicles, sources said.

“I think they have good reason to be cautious. If I was in Germany, I don’t think I’d fill up with E10. It’s not worth the risk,” said a second trader.  

Other contentious issues for German consumers are the lower energy content of ethanol and the price difference between E10 and 98 RON.

According to one source, while E10 is priced €5 cents/litre less than 98 RON, a price that would put it €8 cents/litre less than 98 RON would be necessary to compensate for the lower energy content.

“They’re not stupid. The Germans, they know they’ll get less miles to the gallon. They feel betrayed,” added a second trader.

The boost in demand for MTBE has come as a surprise to most sources in the industry, who previously expected the emergence of E10 to undercut ether demand.

Another effect of the poor sales of E10 would be softer ethanol prices, sources predicted.

“European [ethanol] producers were expecting lots of demand, now they’re going to have an oversupply. Plus, with the declining wheat prices we’ve seen recently, I expect ethanol prices to go down,” said a trader.

While the German government has indicated it intends to stick with E10, sources said consumers would have to be provided an incentive through more significant price discounts.

Another alternative was for gasoline producers to simply pass on to consumers the fines they incur for not meeting minimum renewable fuel content in the form of more expensive 95 RON gasoline, said another trader.

One important mistake made by the German government, according one source, was to assume it could follow France’s example of introducing E10.

In France, however, the key difference was that E10 contains 5% ethanol and 5% ethyl tertiary butyl ether (ETBE), a bio-ether. This not only removes the added risks of 10% ethanol, but it also means the energy content is not sacrificed.

While one ether producer did note an increase in demand for ETBE similar to that for MTBE, this was not widespread.

Other sellers said ETBE was seeing the same problems as all other biofuels with regards to renewability certification, which is most stringent in Germany, and as a result ETBE was not yet fully reaping the benefits of higher ether demand.

On 2 March, MTBE prices were at two-and-a half-year highs of $1,150/tonne (€840tonne/tonne) FOB (free on board) AR (Amsterdam, Rotterdam). Sources warned, however, that these high prices were the result of strong gasoline prices more than unusually firm MTBE market fundamentals.

The value of MTBE is generally assessed as a factor relative to gasoline, which on 10 March was 1.12-1.13. The absolute MTBE price was $1,102/tonne FOB AR.

($1 = €0.73)

For more on MTBE visit ICIS chemical intelligence

By: Ross Yeo
+44 208 652 3214

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