INEOS declares FM on Grangemouth ethanol in already-tight market

27 July 2011 17:56  [Source: ICIS news]

LONDON (ICIS)--INEOS has declared force majeure (FM) on its ethanol production at Grangemouth in the UK following an unplanned shutdown which is likely to exacerbate already-tight market conditions, market players said on Wednesday.

The FM came into effect on 25 July and the ethanol facility remains off-line, said a company source.

The company declined to comment on reasons for the outage or possible duration of the shutdown and FM.

Nameplate ethanol capacity at the site is 340,000 tonnes/year, according to the ICIS plants and projects database.

Some buying and selling sources said the FM is likely to further tighten the market for industrial ethanol grades and is likely to have a particular localised effect in the UK, as INEOS is the sole domestic synthetic ethanol supplier.

Ethanol supply in Europe has been restricted for the last few quarters due to globally-poor harvests over the last year and concerns about lower-than-expected crops from the new Brazilian harvest, as well as the gap between the next harvests in Europe, which are due in August/September.

The dearth of imports amid strong demand and higher prices outside Europe, more favourable margins for food over ethanol, strong European demand, as well as a spate of plant maintenance shutdowns, has also limited European ethanol supply.

Some players expect ethanol prices to firm in the coming weeks, supported by increased supply constraints and higher ethylene feedstock costs following news of the initial ethylene settlement.

European industrial 99% ethanol prices in July are between £900-980/tonne FD (free delivered) in the UK and €80-85/hlt ($116-123/hlt) FD in Germany.

There is some expectation that the summer holiday period in August may help to mitigate the supply constraints to a certain extent, although a few sources suggest that there is little-to-no summer slowdown in demand in the UK in August, as players start to prepare for the approaching winter screenwash season and pre-production for fragrances ahead of Christmas.

($1 = €0.69, €1 = £0.88)

By: Heidi Finch
+44 20 8652 3214

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