Bearish trend indicated for most Europe ethanol Q2 contracts

03 April 2013 23:59  [Source: ICIS news]

LONDON (ICIS)--A significant proportion of European traditional ethanol second-quarter contracts have now been concluded, and market participants indicated on Wednesday that a downward price trend has prevailed in most cases.

A modest downward trend was indicated for second-quarter contracts on molasses-based 96% beverage grade.

One producer said its contract prices had fallen by at least €1/hl ($1.28/hectolitre), bringing its prices into the range of €74-79/hl FD (free delivered).

The source said unseasonably cold weather is undermining demand at a time of year when offtake usually increases sharply. The producer added that imports from Pakistan are having a greater impact on the market than they would if consumption levels were higher.

A reseller said it had concluded its second-quarter contracts at price levels that were €1-2/hl lower than the assessed range of €75-80/hl FD France and Germany.

The source said it was not seeing any impact on demand specifically as a result of the continuing low temperatures, but acknowledged that there has been some erosion overall.

Other sources had previously said that decreases of €1-2/hl would be representative for the majority of second-quarter contracts, citing an oversupplied market resulting from increased imports and reduced offtake.

Summer is traditionally the peak beverage consumption season in Europe, but macroeconomic weakness is expected to erode demand.

The second-quarter price trend for 99% industrial grade is less clear than for beverage grade, owing to differences in raw material costs and derivative demand.

One producer said its prices were stable in some cases, but large buyers had managed to negotiate price cuts of around €1/hl. The source suggested that €77-81/hl FD was a representative range for northwest Europe.

Prices for 99% industrial grade are currently assessed by ICIS at €78-82/hl FD France and Germany.

A producer of synthetic ethanol said it had concluded its contracts at a mixture of rollovers and small increases.

Another synthetic producer said last week that its raw material costs had increased significantly and it would aim to recover margins wherever possible.

Ethylene is the principal feedstock for synthetic ethanol, and the monthly contract price movement has become significantly more volatile since the beginning of 2012.

While the March contract increased by €50/tonne, putting pressure on producers' margins, the April price was agreed last week at a decrease of €60/tonne.

A UK ethanol reseller said it is targeting rollovers, but one or two of its second-quarter contracts have been concluded at a slightly lower price compared with the first quarter.

The source said its April prices were rolled over from March at £810/tonne (€953/tonne) FD UK and above. The source added that demand remains poor.

A buyer said it had been offered a slight decrease for its second-quarter contracts from a large supplier, but a smaller supplier had requested increases.

A buyer said it is settling its second-quarter contracts for 96% Rectified Neutral (REN) grade at €61.00-61.50/hl FCA (free carrier) Rotterdam on average, representing an average drop of €2/hl from the first quarter.

The source said the price decrease had been achieved partly as a result of Pakistani imports, but added offtake for many industrial applications is low on account of macroeconomic weakness.

A producer confirmed that its second-quarter contract prices for 96% REN grade ethanol have declined by €2-3/hl.

A reseller said demand has persisted for longer than usual this year because of the cold weather and consequent increased demand for screenwash. However, the source said the overall market impact was negligible and the supply chain is not depleted.

Spot prices for 96% REN grade were heard most recently at €63-65/hl FCA Rotterdam.

($1 = €0.78, €1 = £0.85)

By: Samuel Weatherlake
+44 20 8652 3214

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