Europe ethanol prices peak in April/Q2 on high costs, short supply

01 April 2011 23:59  [Source: ICIS news]

LONDON (ICIS)--European ethanol contract prices have firmed by up to €10/hlt ($14/hlt) for April and the second quarter, reaching peak levels as values are driven by high feedstock costs and short supply, market players said on Friday.

Prices have hit record highs for 96% beverage and 99% industrial grades, according to ICIS information dating back to 1999.  

The largest hikes of up to €10/hlt (hectolitre) were seen in Italy, due to particularly short supply, as the country was structurally dependent on imports, which remained pratically non-existent.

The latter was due to poor harvests globally over recent months, resulting from a spate of natural disasters, as well as increasing competition for feedstocks from the food and fuel sectors.

On top of this, forthcoming plant turnarounds for synthetic ethanol manufacturers, were also another contributory factor limiting European supply, along with good demand.

The uptrend in ethanol prices for April and the second quarter was also attibuted to high raw material costs from both agricultural and synthetic sources, which had seen sugar, grain and ethylene prices hit historical peaks during the first quarter of 2011.

While both buyers and sellers agreed that prices had moved up in April/the second quarter by €3-10/hlt, depending on source, country and volume, views on contract validity were mixed.

Some ethanol sellers had switched from quarterly to monthly contracts where possible, particularly in Italy, in view of the upstream price volatility and supply constraints.

Buyers in northwest Europe, however, were generally resistant to shorter term agreements, in view of their longer term downstream contract commitments. Other suppliers also said they would uphold their traditional quarterly contracts in order to maintain longstanding relations.

Prices for European 96% beverage grade ethanol, based on molasses feedstock, were assessed between €72-82/hlt FD (free delivered), according to ICIS. This depended on source, volume size and region and reflected increases ranging from €4-10/hlt from the previous month/quarter.

96% beverage grade prices remained more competitive in France than in Germany and Italy, particularly due to the strong concentration of production in the region.

Some main producers confirmed prices in the low €70s/hlt FD in northwest Europe as a minimum, particularly for large volume accounts, although a few suppliers contested this, stating that they were not selling below the mid-to-upper €70s/hlt FD, reporting prices up to €80/hlt FD in northwest Europe. However, the latter was not widely confirmed.

In the UK, 96% potable grade ethanol, molasses based product, was mainly valued between £63-67/hlt FD, which represented increases of £3-4/hlt from the previous month/quarter. Numbers either side of the range were also heard in a few cases, but widely confirmed.

European Industrial 99% ethanol prices were pegged between €78-86/hlt FD, depending on source and region. This reflected rises of €3-10/hlt from March/the first quarter.

Numbers down to the low-to-mid €70s/hlt FD were also heard from a few buyers, but not seen to reflect the general market direction. By contrast, higher prices were also also in a few cases, but there was insufficient market confirmation to substantiate the highest levels.

In the UK, industrial 99% ethanol prices were assessed up by £30-70/tonne, taking values to £860-960/tonne FD for April/the second quarter. Lower numbers were also heard, but they were deemed exceptional.

($1 = €0.70, £0.62)

For more on ethanol visit ICIS chemical intelligence

By: Heidi Finch
+44 20 8652 3214

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